Details

Autor(en) / Beteiligte

• Brolley, Michael
• Cimon, David A.

Titel

Order-Flow Segmentation, Liquidity, and Price Discovery: The Role of Latency Delays

Ist Teil von

• Journal of financial and quantitative analysis, 2020-12, Vol.55 (8), p.2555-2587

Ort / Verlag

New York, USA: Cambridge University Press

Erscheinungsjahr

2020

Link zum Volltext

Quelle

EBSCOhost Business Source Ultimate

Beschreibungen/Notizen

• Latency delays intentionally slow order execution at an exchange, often to protect market makers against latency arbitrage. We study informed trading in a fragmented market in which one exchange introduces a latency delay on market orders. Liquidity improves at the delayed exchange as informed investors emigrate to the conventional exchange, where liquidity worsens. In aggregate, implementing a latency delay worsens total expected welfare. We find that the impact on price discovery depends on the relative abundance of speculators. If the exchange with delay technology competes against a conventional exchange, it implements a delay only if it has sufficiently low market share.