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

Ekinci C. E., Ersan O.

INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS, cilt.79, 2022 (SSCI) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 79
  • Basım Tarihi: 2022
  • Doi Numarası: 10.1016/j.irfa.2021.102004
  • Dergi Adı: INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus, ABI/INFORM, Business Source Elite, Business Source Premier, EconLit
  • Anahtar Kelimeler: High-frequency trading (HFT), Liquidity provision, Volatility, Returns, Borsa Istanbul, LIQUIDITY, IMPACT, TRADERS, PROVISION
  • İstanbul Teknik Üniversitesi Adresli: Evet

Özet

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.