High Frequency Trading and Extreme Price Movements

@inproceedings{Brogaard2015HighFT,
  title={High Frequency Trading and Extreme Price Movements},
  author={Jonathan Brogaard and Allen Carrion and Thibaut Moyaert and Ryan Riordan and Andriy Shkilko and Konstantin Sokolov},
  year={2015}
}
Endogenous liquidity providers (ELPs) are often viewed as unreliable in times of stress. We examine the activity of a common ELP type – high frequency traders (HFTs) – around extreme price movements (EPMs). We find that HFTs provide liquidity during EPMs and absorb imbalances created by non-high frequency traders (nHFTs). This relation is observed for various types of EPMs, including those resulting in permanent price changes and those that occur during the 2008 financial crisis. There is… CONTINUE READING

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