Finance Cluster Seminar: Professor Robert Korajczyk

18 July, 2016 - 13:00 to 14:30
Sir Llew Edwards Building 14, Terrace Room

We study high-frequency trader (HFT) marker maker behavior in the presence of large trade packages. HFTs lose money on trading and make money from liquidity rebates. HFT liquidity provision is significantly reduced for large “stressful" trades with this reduction being more pronounced when an HFT assumes the designated market maker role. Over the life of a large trade, HFTs initially accommodate the order but switch to competing with the order. This is due to both inventory management and order anticipation. Average implementation shortfall for non-stressful (stressful) trades is 11 (35) basis points and is significantly affected by HFT liquidity provision.

 

Professor Robert Korajczyk