Wait or Trade?
61 Pages Posted: 7 Nov 2015 Last revised: 12 Apr 2021
Date Written: April 12, 2021
I study the effect of high-frequency traders' (HFTs') activity on the strategic choice of informed traders for market versus limit orders. I find that an exogenous increase in HFTs' activity around the introduction of the NYSE Hybrid Market leads to a significant increase of both impatient and patient informed trading, with the latter effect being the dominant one. I find this effect to be more profound for large stocks, while for small stocks increase in patient and impatient informed trading due to an exogenous increase in HFTs' activity offset each other.
Keywords: Price Discovery, Limit Order Book, Liquidity Provision, High-Frequency Trading.
JEL Classification: G12, G14
Suggested Citation: Suggested Citation