High‐Frequency Trading and the Execution Costs of Institutional Investors. Issue 2 (May 2014)

• Record Type: Journal Article
• Authors: Brogaard, Jonathan; Hendershott, Terrence; Hunt, Stefan; Ysusi, Carla; Goldstein, Michael
• Is Part Of: Financial review. Volume 49:Issue 2(2014)
• Page Start: 345
• Page End: 369
• Publication Date: 2014-05
• Subjects: Finance -- United States -- Periodicals; Finance -- Periodicals; 332
• DOI: 10.1111/fire.12039
• Languages: English
• ISSNs: 0732-8516

Abstract

<abstract abstract-type="main"> <title>Abstract</title> <p>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.</p> </abstract>