Meeting on 11/12/17 at 1pm, San Francisco

Our next meeting is scheduled for 11/12/17 (Sunday) at 1pm in San Francisco on the 2nd floor lounge of the Marriott Marquis (780 Mission Street).  See here for more information about the venue. Once you enter the hotel, go to the 2nd floor using the escalator and you will see a lounge with sofas and tables. Feel free to send an email if you have trouble finding it.

We will be starting a discussion on high frequency trading. See here for paper.


High Frequency Trading and the New-Market Makers

From the abstract:

This paper characterizes the trading strategy of a large high-frequency trader (HFT). The HFT incurs a loss on its inventory but earns a profit on the bid-ask spread. Sharpe ratio calculations show that performance is very sensitive to cost of capital assumptions. The HFT employs a cross-market strategy as half of its trades materialize on a large incumbent market and the other half on a small, high-growth entrant market. Trade participation rates are 8.1% and 64.4%, respectively. In both markets, about four out of five of its trades are passive, i.e., its price quote was consumed by others.

“High Frequency Trading and the New-Market Makers.” Albert J. Menkveld. Dec. 2010 VU University Amsterdam; Tinbergen Institute – Tinbergen Institute Amsterdam (TIA)

See here for the paper.