High-Frequency Trading around Large Institutional Orders

Arbeitspapier

Liquidity suppliers lean against the wind. We analyze whether high-frequency traders (HFTs) lean against large institutional orders that execute through a series of child orders. The alternative is HFTs trading "with the wind," that is, in the same direction. We find that HFTs initially lean against these orders but eventually change direction and take position in the same direction for the most informed institutional orders. Our empirical findings are consistent with investors trading strategically on their information. When deciding trade intensity, they seem to trade off higher speculative profit against higher risk of detection by HFTs and being preyed on.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 17-092/IV

Classification and Topics

• Classification: Wirtschaft ; General Financial Markets: General (includes Measurement and Data) ; Information and Market Efficiency; Event Studies; Insider Trading ; International Financial Markets
• Subject: High-frequency traders ; institutional investors ; trading patterns ; transaction cost

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): van Kervel, Vincent ; Menkveld, Albert J.
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/177660
• Last update: 10.03.2025, 11:43 AM CET