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Albert J. Menkveld   My Two Cents   
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Jun 1, 2016
HFT good or bad? A literature survey
Today the Dutch regulator AFM published a study on high-frequency trading (HFT). They characterize it as a data driven assessment of HFT trading strategies. In parallel, I released a survey of the academic literature on HFT. AFM kindly let me...

Apr 26, 2016
Information Flows - Euro Swiss Franc (Crash)
In which market does information originate and, how does it flow? This is not such an interesting question if there is a single national exchange. That exchange however no longer receives streams of buy and sell orders, but flocks of...

Jun 18, 2015
High-Frequency Trading around Large Institutional Orders
When high-frequency traders (HFTs) enter markets, the bid-ask spread declines. Several academic studies have reported such result. Investors pay less for each market order they send. All good and everyone happy. Everyone? Retail investors, probably. They can send all they...

Feb 24, 2015
Who Supplies Liquidity? We Need A New Definition
I plead for a new, more general definition of liquidity suppliers in securities markets. I propose "He who trades against price pressures, supplies liquidity," instead of "He whose price quote is taken by an incoming market order, supplies liquidity." If...

Oct 16, 2014
Shades of Darkness. A Pecking Order of Trading Venues
Suppose you gave your girlfriend her favorite concert on her birthday. The cry of joy and the smile across her face. Irresistible. But, you don't have the ticket yet. You just created yourself a short position of a ticket, or...

Jul 7, 2014
Pay-to-Play Equilibria
It was in Thomas Sargent's class at NYU that I first came upon the "want" operator. When complexity started to overwhelm, he would write "want" on the white board, followed by a colon. Want: ... This way he would force...

Jun 16, 2014
Dutch High-Frequency Traders Soon Faster than Speed of Light?
Albert Einstein famously doubted one of the implications of his quantum theory. He did not believe that information could be transmitted without moving the material to which it was attached. "Spooky action at a distance," is what he called it....

May 28, 2014
Is an Even Faster Exchange Good For Market Quality?
Flash boys want flash markets. Exchanges invest to make their matching engines clock at ever higher speeds. High-frequency traders claim they can provide more liquidity as a result. Investors -- the low-frequency traders in the market -- benefit from a...

Apr 8, 2014
Crowded Trades Hidden Risk for CCPs
Central clearing counterparties (CCPs) are particularly vulnerable if multiple traders collapse at the same time. One source of such risk is when trades crowd on a single security or risk factor. This risk is overlooked in standard CCP risk management...