The Effects of High-frequency Anticipatory Trading: Small Informed Trader vs. Round-Tripper
Fuente:
arXiv
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| Autores principales: | , |
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| Formato: | Preprint |
| Publicado: |
2023
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| Acceso en línea: | |
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| _version_ | 1866929255357612032 |
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| author | Xu, Ziyi Cheng, Xue |
| author_facet | Xu, Ziyi Cheng, Xue |
| contents | In an extended Kyle's model, the interactions between a large informed trader and a high-frequency trader (HFT) who can anticipate the former's incoming order are studied. We find that, in equilibrium, HFT may play the role of Small-IT or Round-Tripper: both of them trade in the same direction as IT in advance, but when IT's order arrives, Small-IT continues to take liquidity away, while Round-Tripper supplies liquidity back. So Small-IT always harms IT, while Round-Tripper may benefit her. What's more, with an anticipatory HFT, normal-speed small uninformed traders suffer less and price discovery is accelerated. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2304_13985 |
| institution | arXiv |
| publishDate | 2023 |
| record_format | arxiv |
| spellingShingle | The Effects of High-frequency Anticipatory Trading: Small Informed Trader vs. Round-Tripper Xu, Ziyi Cheng, Xue Trading and Market Microstructure General Economics Economics Mathematical Finance In an extended Kyle's model, the interactions between a large informed trader and a high-frequency trader (HFT) who can anticipate the former's incoming order are studied. We find that, in equilibrium, HFT may play the role of Small-IT or Round-Tripper: both of them trade in the same direction as IT in advance, but when IT's order arrives, Small-IT continues to take liquidity away, while Round-Tripper supplies liquidity back. So Small-IT always harms IT, while Round-Tripper may benefit her. What's more, with an anticipatory HFT, normal-speed small uninformed traders suffer less and price discovery is accelerated. |
| title | The Effects of High-frequency Anticipatory Trading: Small Informed Trader vs. Round-Tripper |
| topic | Trading and Market Microstructure General Economics Economics Mathematical Finance |
| url | https://arxiv.org/abs/2304.13985 |