High-Frequency Traders and Single-Dealer Platforms

Aramian, Fatemeh; Nordén, Lars

doi:10.2139/ssrn.3738608

Cited by 3 publications

(2 citation statements)

References 44 publications

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“…We follow Baron et al (2019) and identify trading firms that are members of the Futures Industry Association's European Principal Traders Association, which is an industry organization for principal trading firms, as HFT firms. These firms are known to be proprietary traders (see Aramian & Nordén, 2021, who perform a similar classification of trading firms). 6 Moreover, trading firms that are not high-frequency traders are classified as brokerage firms.…”

Section: Datamentioning

confidence: 99%

Futures trading costs and market microstructure invariance: Identifying bet activity

Hou,

Nordén,

2024

Journal of Futures Markets

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Market microstructure invariance (MMI) stipulates that trading costs of financial assets are driven by the volume and volatility of bets, but these variables are inherently difficult to identify. With futures transactions data, we estimate bet volume as the trading volume of brokerage firms that trade on behalf of their clients and bet volatility as the trade‐related component of futures volatility. We find that the futures bid–ask spread lines up with bet volume and bet volatility as predicted by MMI, and that intermediation by high‐frequency traders does not interfere with the MMI relation.

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Section: Datamentioning

confidence: 99%

Futures trading costs and market microstructure invariance: Identifying bet activity

Hou,

Nordén,

2024

Journal of Futures Markets

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“…They document that a fraction of dark pool order flows migrates to SIs following the implementation of the double volume cap and that the liquidity effect of the ban is benign. Focusing on the trading activity of SIs run by high-frequency traders (HFTs), Aramian and Nordén (2021) show that HFT-SIs deteriorate the displayed liquidity on the primary exchange by decreasing the depth and increasing the spread. Different from these studies, we address traders' order routing strategies, trading costs, and the information content of trades on SIs.…”

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confidence: 99%

Costs and benefits of trading with stock dealers: The case of systematic internalizers

Aramian

Nordén

2023

Euro Fin Management

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Systematic internalizers are single‐dealer platforms run by investment firms that trade out of their own inventories by internalizing the trades off exchanges. We analyze the determinants of dealers' market shares and trading costs. We find that dealer trades have lower price impacts than exchange trades, consistent with uninformed traders seeking out dealers. Due to their ability to avoid trading with informed investors, dealers often undercut the exchange bid–ask spread when the spread is wide and the tick size is not binding. Dealers can therefore offer lower trading costs and gain a higher market share relative to exchanges.

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Do We Need Electronic Stock Dealers?

Aramian

Nordén

2019

SSRN Journal

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High-Frequency Traders and Single-Dealer Platforms

Cited by 3 publications

References 44 publications

Futures trading costs and market microstructure invariance: Identifying bet activity

Futures trading costs and market microstructure invariance: Identifying bet activity

Costs and benefits of trading with stock dealers: The case of systematic internalizers

Do We Need Electronic Stock Dealers?

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