ScienceDirect Publication: Journal of Empirical Finance
Sat, 14 Dec 2019 00:01:07 GMT language
Publication date: Available online 13 December 2019
Source: Journal of Empirical Finance
Author(s): Marie Chen, Corey Garriott
Using data on Canadian bond futures, we examine how high-frequency traders (HFTs) interact with institutions building large positions. In contrast to recent findings, we find HFTs in the data act as small-sized liquidity suppliers, and we reject the hypothesis that they engage in back running, a predatory trading strategy. Using a quasi-experiment in November 2011, in which a number of HFTs started trading the bond future, we run a difference-in-differences event study and find more competition among HFTs improves implementation shortfall, effective spreads, and short-term price impacts for institutional trading in Canadian bond futures.