• Corpus ID: 1740433

Competition between High-Frequency Market Makers, and Market Quality

@inproceedings{Breckenfelder2013CompetitionBH,
  title={Competition between High-Frequency Market Makers, and Market Quality},
  author={H.-Johannes Breckenfelder},
  year={2013}
}

• H.-Johannes Breckenfelder
• Published 2013
• Economics

High-frequency trading has been the subject of controversial discussions among legislators, regulators and investors alike, leading to calls for legislative and regulative intervention. The rst entries of large international high-frequency traders into the Swedish equity market in 2009, using NASDAQ OMXS tick data, oers a unique chance to empirically examine how competition aects market quality. Competition among high-frequency market makers coincides (i) with an increase in intraday volatility of about 25%, but interestingly (ii) with no eect on interday volatility, (iii) with a decrease in order-execution time (length of time between an incoming market order or marketable limit order and the standing limit order against which the trade is executed) by about 20%, and (iv) with an increase in market share for highfrequency traders, but (v) with no signicant eect on overall volume. We provide results for both entries and exits, and oer several potential explanations for this rst empirical evidence on competition.