Beyond the Frequency Wall: Speed and Liquidity on Batch Auction Markets
Haas, Marlene; Zoican, Marius Andrei (2016), Beyond the Frequency Wall: Speed and Liquidity on Batch Auction Markets, NYU Stern Market Microstructure Meeting, 2016-05, New York City, United States
TypeCommunication / Conférence
External document linkhttps://papers.ssrn.com/sol3/papers2.cfm?abstract_id=2738071
Conference titleNYU Stern Market Microstructure Meeting
Conference cityNew York City
Conference countryUnited States
MetadataShow full item record
Abstract (EN)Frequent batch auction (FBA) markets do not necessarily improve liquidity relative to continuous-time trading. HFTs submit quotes that become stale if the market clears before new information becomes public, and may be sniped by other privately-informed HFTs. Less frequent auctions enhance learning by allowing for more public news: liquidity improves. For infrequent enough auctions, a frequency "wall" emerges as lower adverse selection is offset by lower liquidity demand by impatient traders. Beyond this "wall," longer auction intervals do not improve liquidity anymore. However, higher HFT speed stimulates price competition between arbitrageurs, allowing for a lower spread.
Subjects / Keywordsmarket design; high-frequency trading; batch auction markets; liquidity; adverse selection; D43; D47; G10; G14
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