Abstract
The electron microscope improved our vision by a factor of 1 million, enabling us to see atoms. In this study, I aim for a similar leap by examining trades executed in nanoseconds, a million times more precise than the oft-used milliseconds. This approach allows us to observe asset reallocations among rapid-fire “tradebots,” including those used by high-frequency traders (HFTs). Some 20% of trades occur in submillisecond clusters, which seem to have no price instability. Although submillisecond trade bursts are costly to non-HFTs in terms of adverse selection, these costs can be avoided.
Original language | English |
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Pages (from-to) | 24-31 |
Number of pages | 8 |
Journal | Financial Analysts Journal |
Volume | 74 |
Issue number | 2 |
DOIs | |
Publication status | Published - 1 Jan 2018 |
Funding
I thank Björn Hagströmer, Terrence Hendershott, Wenqian Huang, Vincent van Kervel, Shihao Yu, Bart Yueshen, and Marius Zoican for helpful comments and NASDAQ for providing data. I am grateful to NWO (the Netherlands Organisation for Scientific Research) for a Vidi grant.