Albert J. Menkveld

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This paper characterizes the trading strategy of a large high frequency trader (HFT). The HFT incurs a loss on its inventory but earns a profit on the bid–ask spread. Sharpe ratio calculations show that performance is very sensitive to cost of capital assumptions. The HFT employs a cross-market strategy as half of its trades materialize on the incumbent(More)
There are some minor typos of the sort wherein an " an " is printed as " and ". I list below the more substantive typos. Chapter 4. Page 34. The line immediately after the formula should start " where   t  is a zero-mean white noise process… " Chapter 4. Page 36. Line immediately after the formula should be " …a power series expansion of   1 1 L
In recent years most equity trading platforms moved to subsidize the provision of liquidity. Under such a make/take fee structure, submitters of limit orders typically receive a rebate upon execution of their orders, while submitters of market orders pay higher fees. We study the impact of this, now prevalent, fee structure on market quality, trader costs,(More)
Common wisdom has it that competition between trading platforms in securities markets benefits investors because it forces platforms to charge smaller fees. We challenge this view by showing that a decrease in trading fees can impair investors' expected welfare in limit order markets. Indeed, a decrease in trading fees can induce investors to strategically(More)
In 2004 all publications will carry a motif taken from the €100 banknote. Network in Frankfurt for their comments.We gratefully acknowledge the support of MTS Spa and Barbara Rindi in building the database. For research assistance, we are grateful to Patricia van Dam.The usual disclaimer applies. Telex 411 144 ecb d All rights reserved. Reproduction for(More)
Pagnotta for comments. We are grateful to both Euronext and Chi-X for acting as data sponsor and to Bernard Hosman whose exploratory analysis has been invaluable. Jo-vanovic thanks the Kauffman Foundation for support and Menkveld gratefully acknowledges Robert Engle for sponsoring his NYU visit in 08/10 and VU University Amsterdam for a VU talent grant.(More)
This paper reviews recent theoretical and empirical research on high-frequency trading (HFT). Economic theory identifies several ways that HFT could affect liquidity. The main positive is that HFT can intermediate trades at lower cost. However, HFT speed could disadvantage other investors, and the resulting adverse selection could reduce market quality.(More)
Market integration is studied for Dutch stocks cross-listed at the NYSE. Trading starts in Amsterdam and ends in New York with a one-hour overlap. Both markets are not perfectly integrated in that they can be viewed as one market with the well-documented U-shape in volatility, volume and spread. Increased values for the hour of overlap suggest informed(More)