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Impact of algorithmic trading on speed of adjustment to new information: Evidence from interest rate derivatives

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  • Alex Frino
  • Michael Garcia
  • Zeyang Zhou

Abstract

In February 2012, the Australian Securities Exchange introduced co‐location services for futures traders, thus providing a natural experiment to test the impact of algorithmic trading (AT) on the speed of adjustment and price discovery during scheduled macroeconomic releases. Our results demonstrate that, in the presence of AT, the speed of adjustment to new information has improved for both exchange‐traded futures and over‐the‐counter‐traded swaps. In addition, we find that the price discovery contribution of the futures market improves in the post‐AT period, with this improvement significant for macroeconomic announcement days.

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  • Alex Frino & Michael Garcia & Zeyang Zhou, 2020. "Impact of algorithmic trading on speed of adjustment to new information: Evidence from interest rate derivatives," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(5), pages 749-760, May.
    • Handle: RePEc:wly:jfutmk:v:40:y:2020:i:5:p:749-760
    DOI: 10.1002/fut.22104
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    References listed on IDEAS

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    3. David Alaminos & María Belén Salas & Manuel A. Fernández-Gámez, 2024. "High-Frequency Trading in Bond Returns: A Comparison Across Alternative Methods and Fixed-Income Markets," Computational Economics, Springer;Society for Computational Economics, vol. 64(4), pages 2263-2354, October.

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