Arbeitspapier
Order flow segmentation, liquidity and price discovery: The role of latency delays
Latency delays - known as "speed bumps" - are an intentional slowing of order flow by exchanges. Supporters contend that delays protect market makers from high-frequency arbitrage, while opponents warn that delays promote "quote fading" by market makers. We construct a model of informed trading in a fragmented market, where one market operates a conventional order book and the other imposes a latency delay on market orders. We show that informed investors migrate to the conventional exchange, widening the quoted spread, while the quoted spread narrows at the delayed exchange. The overall market quality impact depends on the relative concentration of speculators who may become informed. If speculators are few relative to liquidity traders, total welfare falls; with relatively more speculators, total welfare rises.
- Sprache
-
Englisch
- Erschienen in
-
Series: Bank of Canada Staff Working Paper ; No. 2018-16
- Klassifikation
-
Wirtschaft
Information and Market Efficiency; Event Studies; Insider Trading
General Financial Markets: Government Policy and Regulation
- Thema
-
Financial markets
Market structure and pricing
Financial system regulation and policies
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Brolley, Michael
Cimon, David A.
- Ereignis
-
Veröffentlichung
- (wer)
-
Bank of Canada
- (wo)
-
Ottawa
- (wann)
-
2018
- DOI
-
doi:10.34989/swp-2018-16
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Brolley, Michael
- Cimon, David A.
- Bank of Canada
Entstanden
- 2018
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