High-frequency trading – a discussion of relevant issues - Xetra
High-frequency trading – a discussion of relevant issues - Xetra
High-frequency trading – a discussion of relevant issues - Xetra
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<strong>High</strong>-<strong>frequency</strong> <strong>trading</strong> <strong>–</strong> a <strong>discussion</strong> <strong>of</strong> <strong>relevant</strong> <strong>issues</strong> May 2013Reduction in exchange latency improves situation <strong>of</strong> liquidityproviders which leads to better market qualityThe biggest risk for liquidityproviders is that new informationimplies new price levels and theliquidity provider is not able toupdate its quotes before otherstake advantage <strong>of</strong> the outdatedquote.The indicator for this is thenumber <strong>of</strong> "unwanted trades":We measure it by the number <strong>of</strong>times, when one party sought tomodify/delete its order/quote, butit is was already matched.Evidence from Eurex Exchangeshows that a significant reductionin exchange latency in 2009 haslead to a massive reduction <strong>of</strong> thenumber <strong>of</strong> unwanted trades.This enables the liquidityproviders to provide higher quotequality in terms <strong>of</strong> spread andsize to the market.11
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