Order protection through delayed messaging

Arbeitspapier

Several financial exchanges have recently introduced messaging delays (e.g., a 350 microsecond delay at IEX and NYSE American) intended to protect ordinary investors from high-frequency traders who exploit stale orders. We propose an equilibrium model of this exchange design as a modification of the standard continuous double auction market format. The model predicts that a messaging delay will generally improve price efficiency and lower transactions cost but will increase queuing costs. Some of the predictions are testable in the field or in a laboratory environment.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: WZB Discussion Paper ; No. SP II 2017-502

Classification and Topics

• Classification: Wirtschaft ; Design of Experiments: Laboratory, Individual ; Auctions ; Market Design ; General Equilibrium and Disequilibrium: Financial Markets ; Asset Pricing; Trading Volume; Bond Interest Rates ; Information and Market Efficiency; Event Studies; Insider Trading
• Subject: market design ; high-frequency trading ; continuous double auction ; IEX ; lab experiments

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Aldrich, Eric M. ; Friedman, Daniel
• Event: Veröffentlichung
• (who): Wissenschaftszentrum Berlin für Sozialforschung (WZB)
• (where): Berlin
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/173265
• Last update: 10.03.2025, 11:43 AM CET