David EasleyCornell University - Department of Economics Marcos M. Lopez de PradoTudor Investment Corp.; RCC at Harvard University; Lawrence Berkeley National Laboratory Maureen O'HaraCornell University - Samuel Curtis Johnson Graduate School of Management Abstract Over the last two centuries, technological advantages have allowed some traders to be faster than others. We argue that, contrary to popular perception, speed is not the defining characteristic that sets High Frequency Trading (HFT)...

David Bicchetti and Nicolas Maystre Abstract This paper analyses the intraday co-movements between returns on several commodity markets and on the stock market in the United States over the 1997-2011 period. By exploiting a new high frequency database, we compute various rolling correlations at (i) 1-hour, (ii) 5-minute, (iii) 10-second, and (iv) 1-second frequencies. Using this database, we document a synchronized structural break, characterized by a departure from zero, which starts in the...

Christian Leber, Benjamin Geib, Heiner Litz   Abstract This paper presents the design of an application specific hardware for accelerating High Frequency Trading applications. It is optimized to achieve the lowest possible latency for interpreting market data feeds and hence enable minimal round-trip times for executing electronic stock trades. The implementation described in this work enables hardware decoding of Ethernet, IP and UDP as well as of the FAST protocol which is a common...

Martin L. ScholtusErasmus University Rotterdam - Erasmus School of Economics - Econometric Institute; Tinbergen Institute Dick J. C. Van DijkErasmus University Rotterdam - Erasmus School of Economics - Econometric Institute; ERIM Tinbergen Institute Discussion Paper 12-018/4 Abstract This paper investigates the importance of speed for technical trading rule performance for three highly liquid ETFs listed on NASDAQ over the period January 6, 2009 up to September 30, 2009. In addition we examine...

Joel HasbrouckNew York University (NYU) - Department of Finance Gideon SaarCornell University - Samuel Curtis Johnson Graduate School of Management September 1, 2011Johnson School Research Paper Series No. 35-2010 Abstract:     This paper studies market activity in the “millisecond environment,” where computer algorithms respond to each other almost instantaneously. Using order-level NASDAQ data, we find that the millisecond environment consists of activity by...

David EasleyCornell University - Department of Economics Marcos Mailoc Lopez de PradoTudor Investment Corp.; RCC, Harvard University Maureen O'HaraCornell University - Samuel Curtis Johnson Graduate School of Management Abstract The ‘flash crash’ of May 6th 2010 was the second largest point swing (1,010.14 points) and the biggest one-day point decline (998.5 points) in the history of the Dow Jones Industrial Average. For a few minutes, $1 trillion in market value vanished. In this...

Su LiUniversity of Maryland - Robert H. Smith School of Business January 24, 2012 Abstract I analyze the nature of imperfect competition among informed traders who continuously generate and exploit private information. I find the following results: (i) the combined trading of multiple informed traders is more aggressive than the monopolistic trader in Chau and Vayanos (2008), (ii) the equilibrium price is even more revealing of the informed trader's private information, and (iii) market depth...

By Peter Gomber, Björn Arndt, Marco Lutat, Tim Uhle Executive Summary High-frequency trading (HFT) has recently drawn massive public attention fuelled by the U.S. May 6, 2010 flash crash and the tremendous increases in trading volumes of HFT strategies. Indisputably, HFT is an important factor in markets that are driven by sophisticated technology on all layers of the trading value chain. However, discussions on this topic often lack sufficient and precise information. A remarkable gap...

Neil Johnson, Guannan Zhao, Eric Hunsader, Jing Meng, Amith Ravindar, Spencer Carran, Brian Tivnan Abstract Society's drive toward ever faster socio-technical systems, means that there is an urgent need to understand the threat from 'black swan' extreme events that might emerge. On 6 May 2010, it took just five minutes for a spontaneous mix of human and machine interactions in the global trading cyberspace to generate an unprecedented system-wide Flash Crash. However, little is known about what...

Irene Aldridge Twitter: @ialrdridge Abstract This article describes a simple test to assess the feasibility of high-frequency “pump-and-dump” arbitrage. Using the tick data for Eurex Eurobund futures for 2009-2010 period, the article shows practical implementation of the test. The Eurobund futures data does not support feasibility of highfrequency pump-and-dump. The data instead shows that Eurobund futures are resilient to large trade sizes, a welcome feature for large...