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High‐Frequency Trading and the Execution Costs of Institutional Investors
Author(s) -
Brogaard Jonathan,
Hendershott Terrence,
Hunt Stefan,
Ysusi Carla
Publication year - 2014
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/fire.12039
Subject(s) - high frequency trading , institutional investor , business , stock exchange , stock (firearms) , latency (audio) , monetary economics , algorithmic trading , economics , finance , computer science , telecommunications , mechanical engineering , corporate governance , engineering
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.