RT Journal Article
SR Electronic
T1 Algorithmic Trading and Fragmentation
JF The Journal of Trading
FD Institutional Investor Journals
SP 18
OP 28
DO 10.3905/jot.2017.12.4.018
VO 12
IS 4
A1 Archana Jain
A1 Chinmay Jain
A1 Christine X. Jiang
YR 2017
UL https://pm-research.com/content/12/4/18.abstract
AB Prior studies on algorithmic trading (AT) have mostly focused on a single exchange. The authors use a public dataset provided by the Securities and Exchange Commission (SEC) covering all major U.S. exchanges to study the impact of AT and its fragmentation on market liquidity. Using a proxy of AT derived from trade to order volume ratio, they find that AT concentrated on a single exchange improves liquidity. However, AT fragmentation onto multiple exchanges is associated with deterioration in liquidity. Their findings suggest a market-making as well as predatory role of AT and have policy implications.TOPICS: Statistical methods, exchanges/markets/clearinghouses