The market quality implications of speed in cross-platform trading: evidence from Frankfurt-London microwave

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dc.contributor.authorid0000-0002-5531-3616
dc.contributor.coauthorIbikunle, Gbenga
dc.contributor.coauthorSteffen, Tom
dc.contributor.departmentDepartment of Business Administration
dc.contributor.kuauthorRzayev, Khaladdin
dc.contributor.kuprofileFaculty Member
dc.contributor.schoolcollegeinstituteCollege of Administrative Sciences and Economics
dc.contributor.yokid317105
dc.date.accessioned2025-01-19T10:34:00Z
dc.date.issued2023
dc.description.abstractExploiting information transmission latency between stock exchanges in Frankfurt and London, and speed-inducing technological upgrades, we show that when cross-market latency arbitrage opportunities are linked to the arrival of information, high-frequency traders' (HFTs') activities impair liquidity and enhance price discovery by facilitating the incorporation of public information into prices. Conversely, when cross-market latency arbitrage opportunities are driven by liquidity shocks, HFTs improve liquidity and reduce trading costs, thus incentivizing information acquisition and trading with private information. These findings underscore the complex nature of the association between trading speed and market quality and reconcile mixed evidence in the extant literature.
dc.description.indexedbyWoS
dc.description.indexedbyScopus
dc.description.openaccesshybrid, Green Published
dc.description.publisherscopeInternational
dc.description.sponsors* For helpful comments, we are grateful to an anonymous referee, an anonymous advisory editor, the Editor (Gideon Saar) , Bruno Biais, Maria Boutchkova, Marcos Carreira, Jo Danbolt, Jon Danielsson, Sean Foley, Angelica Gonzalez, Alexandre Laumonier, Ian Marsh, Han Ozsoylev, Talis Putnins, Mathieu Rosenbaum, Satchit Sagade, Avanidhar Subrahmanyam, Jean-Pierre Zigrand, as well as seminar/conference participants at the 2020 Annual Meeting of the American Finance Association, the 27th Conference on the Theories and Practices of Securities and Financial Markets, the Regulation and Operation of Modern Financial Markets Conference, The Future of Computer Trading in Financial Markets: has it happened? Conference, the 3rd European Capital Markets Workshop, Dublin City University, Koc University, London School of Economics, the University of Edinburgh, and Victoria University of Wellington. Khaladdin gratefully acknowledges the support of the Trans-Atlantic Platform by the Economic and Social Research Council (ESRC) [grant number ES/R004021/1] .
dc.description.volume66
dc.identifier.doi10.1016/j.finmar.2023.100853
dc.identifier.eissn1878-576X
dc.identifier.issn1386-4181
dc.identifier.quartileQ2
dc.identifier.scopus2-s2.0-85166962243
dc.identifier.urihttps://doi.org/10.1016/j.finmar.2023.100853
dc.identifier.urihttps://hdl.handle.net/20.500.14288/26705
dc.identifier.wos1124975900001
dc.keywordsTransmission latency
dc.keywordsMicrowave connection
dc.keywordsHigh-frequency trading
dc.keywordsLiquidity
dc.keywordsPrice discovery
dc.languageen
dc.publisherElsevier
dc.relation.grantnoVictoria University of Wellington; Economic and Social Research Council (ESRC) [ES/R004021/1]
dc.sourceJournal of Financial Markets
dc.subjectBusiness
dc.subjectFinance
dc.titleThe market quality implications of speed in cross-platform trading: evidence from Frankfurt-London microwave
dc.typeJournal Article

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