Order flow segmentation, liquidity and price discovery : the role of latency delays / by Michael Brolley and David A. Cimon. : FB3-5/2018-16E-PDF

“Latency delays—known as “speed bumps”—are an intentional slowing of order flow by exchanges. Supporters contend that delays protect market makers from high-frequency arbitrage, while opponents warn that delays promote “quote fading” by market makers. We construct a model of informed trading in a fragmented market, where one market operates a conventional order book and the other imposes a latency delay on market orders. We show that informed investors migrate to the conventional exchange, widening the quoted spread, while the quoted spread narrows at the delayed exchange. The overall market quality impact depends on the relative concentration of speculators who may become informed. If speculators are few relative to liquidity traders, total welfare falls; with relatively more speculators, total welfare rises"--Abstract, p. ii.

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Renseignements sur la publication
Ministère/Organisme Bank of Canada.
Titre Order flow segmentation, liquidity and price discovery : the role of latency delays / by Michael Brolley and David A. Cimon.
Titre de la série Bank of Canada staff working paper, 1701-9397 ; 2018-16
Type de publication Série - Voir l'enregistrement principal
Langue [Anglais]
Format Électronique
Document électronique
Note(s) "April 2018."
Includes bibliographical references (p. 32-34).
Includes abstract in French.
Information sur la publication [Ottawa] : Bank of Canada, 2018.
Auteur / Contributeur Brolley, Michael.
Cimon, David A.
Description ii, 50 p. : col. charts.
Numéro de catalogue
  • FB3-5/2018-16E-PDF
Descripteurs Stock markets
Finance
Regulation
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