A Game of Hide-and-Seek between Proprietary and Buy-Side Algorithmic Traders: Causal links with Market Quality

被引:2
|
作者
Arumugam, Devika [1 ]
Prasanna, P. Krishna [1 ]
机构
[1] Indian Inst Technol Madras, Dept Management Studies, Chennai 600036, Tamil Nadu, India
关键词
Algorithmic trading; buy side algorithmic trading; high frequency trading; liquidity; market quality; crowding out; proprietary trading; nse;
D O I
10.1080/00036846.2021.1907290
中图分类号
F [经济];
学科分类号
02 ;
摘要
This paper classifies Algorithmic Traders (ATs) as Proprietary Algorithmic Traders (PATs) and Buy-side Algorithmic Traders (BATs) and examines their dynamic relationship with market quality, using data from the National Stock Exchange (NSE), India. We find that the two categories of traders cause a differential impact on market quality measures and vice versa. BATs' order placement improves liquidity by narrowing the quoted spread, while PATs' and BATs' cancellation worsens liquidity by widening the quoted spread. PATs' order placement increases the price impact but reduces the realized spread, whereas their cancellation increases the realized spread. Furthermore, when the quoted spread increases, ATs increase their order placement and cancellation. When the realized spread increases, PATs cancel less of their orders. Contrarily, when the price impact increases, PATs' participation (both order placement and cancellation) and BATs' cancellation increase. Besides, we provide new evidence that among the ATs, order placement of BATs crowds out that of PATs, but not vice versa.
引用
收藏
页码:4788 / 4798
页数:11
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