High-frequency trading and market quality: The case of a “slightly exposed” market

Cumhur Ekinci; Oğuz Ersan

doi:10.1016/j.irfa.2021.102004

High-frequency trading and market quality: The case of a “slightly exposed” market

Cumhur Ekinci^*, Oğuz Ersan

^*Corresponding author for this work

Department of Management Engineering

Kadir Has University

Research output: Contribution to journal › Article › peer-review

5 Citations (Scopus)

Abstract

Impacts of high-frequency trading (HFT) on market quality and various actors have been broadly studied. However, what happens when HFT is not a prominent figure in a market remains relatively unexplored. The paper seeks to answer this question focusing on 30 blue chip stocks in an emerging market, Borsa Istanbul, through Dec 2015 to Mar 2017. Despite a low share in the overall activity, HFT has observable effects, i.e. liquidity provision by non-HFT traders significantly reduces with HFT. Moreover, HFT generates profits on both positive and negative return days. Yet, HFT activity does not have an impact on volatility. These findings raise concerns regarding HFT and show potential externalities are not specific to the markets with HFT dominance.

Original language	English
Article number	102004
Journal	International Review of Financial Analysis
Volume	79
DOIs	https://doi.org/10.1016/j.irfa.2021.102004
Publication status	Published - Jan 2022

Bibliographical note

Publisher Copyright:
© 2021

Funding

This work was supported by the Scientific and Technological Research Council of Turkey (TUBITAK) [grant no 117K908 ]. We thank Yakup Arı, participants at the Lancaster University Financial Econometrics Conference, Bilgi University Conference in honor of Ramazan Gencay, and seminar participants at Bogazici University Financial Engineering program and Kadir Has University International Trade and Finance Department, for valuable comments. This work was supported by the Scientific and Technological Research Council of Turkey (TUBITAK) [grant no 117K908]. We thank Yakup Ar?, participants at the Lancaster University Financial Econometrics Conference, Bilgi University Conference in honor of Ramazan Gencay, and seminar participants at Bogazici University Financial Engineering program and Kadir Has University International Trade and Finance Department, for valuable comments.

Funders	Funder number
Bogazici University
TUBITAK	117K908
Lancaster University
Türkiye Bilimsel ve Teknolojik Araştirma Kurumu

Keywords

Borsa Istanbul
High-frequency trading (HFT)
Liquidity provision
Returns
Volatility

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10.1016/j.irfa.2021.102004

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abstract = "Impacts of high-frequency trading (HFT) on market quality and various actors have been broadly studied. However, what happens when HFT is not a prominent figure in a market remains relatively unexplored. The paper seeks to answer this question focusing on 30 blue chip stocks in an emerging market, Borsa Istanbul, through Dec 2015 to Mar 2017. Despite a low share in the overall activity, HFT has observable effects, i.e. liquidity provision by non-HFT traders significantly reduces with HFT. Moreover, HFT generates profits on both positive and negative return days. Yet, HFT activity does not have an impact on volatility. These findings raise concerns regarding HFT and show potential externalities are not specific to the markets with HFT dominance.",

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High-frequency trading and market quality: The case of a “slightly exposed” market

Abstract

Bibliographical note

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Keywords

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