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High-Frequency Trading and the Execution Costs of Institutional Investors

Author

Listed:
  • Michael Goldstein
  • Jonathan Brogaard
  • Terrence Hendershott
  • Stefan Hunt
  • Carla Ysusi

Abstract

This paper studies whether high-frequency trading (HFT) increases the execution costs of institutional investors. We use technology upgrades that lower the latency of the London Stock Exchange to obtain variation in the level of HFT over time. Following upgrades, the level of HFT increases. Around these shocks to HFT institutional traders’ costs remain unchanged. We find no clear evidence that HFT impacts institutional execution costs.

Suggested Citation

  • Michael Goldstein & Jonathan Brogaard & Terrence Hendershott & Stefan Hunt & Carla Ysusi, 2014. "High-Frequency Trading and the Execution Costs of Institutional Investors," The Financial Review, Eastern Finance Association, vol. 49(2), pages 345-369, May.
    • Handle: RePEc:bla:finrev:v:49:y:2014:i:2:p:345-369
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