Title: The Impact of IT-Based Trading on Securities Markets
Abstract: The emergence of IT-based trading activities like algorithmic trading or high-frequency trading alters the traditional trading environment within financial markets. Thus, the question arises whether this technological arms race positively affects market quality or represents a risk related to market integrity. Within this study, we evaluate the order-to-trade-ratio for measuring overall IT-based trading activity. Furthermore, in a longitudinal study, we assess the impact of the order-to-trade-ratio on market quality. We find strong indications that price uncertainty has decreased with an increased order-to-trade-ratio and therefore has a positive impact on financial markets. However, the mere upgrade of the trading systems does not relate into increased market liquidity.
Publication Year: 2013
Publication Date: 2013-01-07
Language: en
Type: article
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Cited By Count: 1
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