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High-Frequency Trading around Macroeconomic News Announcements: Evidence from the U.S. Treasury Market

Author

Listed:
  • George Jiang
  • Ingrid Lo
  • Giorgio Valente

Abstract

This paper investigates high-frequency (HF) market and limit orders in the U.S. Treasury market around major macroeconomic news announcements. BrokerTec introduced i-Cross at the end of 2007 and we use this exogenous event as an instrument to analyze the impact of HF activities on liquidity and price efficiency. Our results show that HF activities have a negative effect on liquidity around economic announcements: they widen spreads during the pre-announcement period and lower depth on the order book during the post-announcement period. The negative impact on liquidity mainly derives from HF trades. Nonetheless, HF trades improve price efficiency during both the preannouncement and post-announcement periods.

Suggested Citation

  • George Jiang & Ingrid Lo & Giorgio Valente, 2014. "High-Frequency Trading around Macroeconomic News Announcements: Evidence from the U.S. Treasury Market," Staff Working Papers 14-56, Bank of Canada.
    • Handle: RePEc:bca:bocawp:14-56
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    References listed on IDEAS

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    Cited by:

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    3. Giancarlo Corsetti & Romain Lafarguette & Arnaud Mehl, 2019. "Fast Trading and the Virtue of Entropy: Evidence from the Foreign Exchange Market," Discussion Papers 1914, Centre for Macroeconomics (CFM).
    4. Oliver Linton & Soheil Mahmoodzadeh, 2018. "Implications of High-Frequency Trading for Security Markets," Annual Review of Economics, Annual Reviews, vol. 10(1), pages 237-259, August.
    5. Luiza Loredana N?stase, 2016. "The Stability Of International Financial Markets Versus Emerging Economies Vulnerability," Annals of University of Craiova - Economic Sciences Series, University of Craiova, Faculty of Economics and Business Administration, vol. 1(44), pages 160-167.
    6. Keiichi Goshima & Yusuke Kumano, 2018. "Monetary Policy Announcement and Algorithmic News Trading in the Foreign Exchange Market," IMES Discussion Paper Series 18-E-13, Institute for Monetary and Economic Studies, Bank of Japan.
    7. Antoine Bouveret & Mr. Peter Breuer & Ms. Yingyuan Chen & David Jones & Tsuyoshi Sasaki, 2015. "Fragilities in the U.S. Treasury Market: Lessons from the “Flash Rally” of October 15, 2014," IMF Working Papers 2015/222, International Monetary Fund.
    8. Onofrio Panzarino & Francesco Potente & Alfonso Puorro, 2016. "BTP futures and cash relationships: a high frequency data analysis," Temi di discussione (Economic working papers) 1083, Bank of Italy, Economic Research and International Relations Area.
    9. Zhou, Hao & Kalev, Petko S., 2019. "Algorithmic and high frequency trading in Asia-Pacific, now and the future," Pacific-Basin Finance Journal, Elsevier, vol. 53(C), pages 186-207.
    10. Fei Su, 2018. "Essays on Price Discovery and Volatility Dynamics in the Foreign Exchange Market," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 2-2018, January-A.
    11. Sánchez Serrano Antonio, 2020. "High-Frequency Trading and Systemic Risk: A Structured Review of Findings and Policies," Review of Economics, De Gruyter, vol. 71(3), pages 169-195, December.
    12. Su, Fei & Zhang, Jingjing, 2018. "Global price discovery in the Australian dollar market and its determinants," Pacific-Basin Finance Journal, Elsevier, vol. 48(C), pages 35-55.
    13. Nimalendran, Mahendrarajah & Rzayev, Khaladdin & Sagade, Satchit, 2024. "High-frequency trading in the stock market and the costs of options market making," Journal of Financial Economics, Elsevier, vol. 159(C).
    14. repec:uts:finphd:38 is not listed on IDEAS

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    More about this item

    Keywords

    Financial markets;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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