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Interactions among High-Frequency Traders

Benos, Evangelos; Brugler, James; Hjalmarsson, Erik; Zikes, Filip

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Authors

EVANGELOS BENOS Evangelos.Benos@nottingham.ac.uk
Chair in Finance, risk and Banking

James Brugler

Erik Hjalmarsson

Filip Zikes



Abstract

Using unique transactions data for individual high-frequency trading (HFT) firms in the U.K. equity market, we examine the extent to which the trading activity of individual HFT firms is correlated with each other and the impact on price efficiency. We find that HFT order flow, net positions, and total volume exhibit significantly higher commonality than those of a comparison group of investment banks. However, intraday HFT order flow commonality is associated with a permanent price impact, suggesting that commonality in HFT activity is information-based and so does not generally contribute to undue price pressure and price dislocations.

Citation

Benos, E., Brugler, J., Hjalmarsson, E., & Zikes, F. (2017). Interactions among High-Frequency Traders. Journal of Financial and Quantitative Analysis, 52(4), 1375-1402. https://doi.org/10.1017/S0022109017000485

Journal Article Type Article
Acceptance Date Dec 1, 2016
Online Publication Date Jul 25, 2017
Publication Date 2017-08
Deposit Date Apr 23, 2020
Publicly Available Date Mar 28, 2024
Journal Journal of Financial and Quantitative Analysis
Print ISSN 0022-1090
Electronic ISSN 1756-6916
Publisher Cambridge University Press
Peer Reviewed Peer Reviewed
Volume 52
Issue 4
Pages 1375-1402
DOI https://doi.org/10.1017/S0022109017000485
Keywords High-Frequency Trading; Correlated Trading Strategies; Price
Public URL https://nottingham-repository.worktribe.com/output/4330020
Publisher URL https://www.cambridge.org/core/journals/journal-of-financial-and-quantitative-analysis/article/interactions-among-highfrequency-traders/612E11C847D117B16886B530F18BD1F1
Additional Information License: Copyright © Michael G. Foster School of Business, University of Washington 2017

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