High-frequency trading in the stock market and the costs of options market making

IF 10.4 1区 经济学 Q1 BUSINESS, FINANCE Journal of Financial Economics Pub Date : 2024-07-03 DOI:10.1016/j.jfineco.2024.103900
Mahendrarajah Nimalendran , Khaladdin Rzayev , Satchit Sagade
{"title":"High-frequency trading in the stock market and the costs of options market making","authors":"Mahendrarajah Nimalendran ,&nbsp;Khaladdin Rzayev ,&nbsp;Satchit Sagade","doi":"10.1016/j.jfineco.2024.103900","DOIUrl":null,"url":null,"abstract":"<div><p>We investigate how high-frequency trading (HFT) in equity markets affects options market liquidity. We find that increased aggressive HFT activity in the stock market leads to wider bid–ask spreads in the options market through two main channels. First, options market makers’ quotes are exposed to sniping risk from HFTs exploiting put–call parity violations. Second, informed trading in the options market further amplifies the impact of HFT in equity markets on the liquidity of options by simultaneously increasing the options bid–ask spread and intensifying aggressive HFT activity in the underlying market.</p></div>","PeriodicalId":51346,"journal":{"name":"Journal of Financial Economics","volume":null,"pages":null},"PeriodicalIF":10.4000,"publicationDate":"2024-07-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S0304405X24001235/pdfft?md5=7a085ce5241675bdd865a9d548d42d53&pid=1-s2.0-S0304405X24001235-main.pdf","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Financial Economics","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0304405X24001235","RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0

Abstract

We investigate how high-frequency trading (HFT) in equity markets affects options market liquidity. We find that increased aggressive HFT activity in the stock market leads to wider bid–ask spreads in the options market through two main channels. First, options market makers’ quotes are exposed to sniping risk from HFTs exploiting put–call parity violations. Second, informed trading in the options market further amplifies the impact of HFT in equity markets on the liquidity of options by simultaneously increasing the options bid–ask spread and intensifying aggressive HFT activity in the underlying market.

查看原文
分享 分享
微信好友 朋友圈 QQ好友 复制链接
本刊更多论文
股票市场的高频交易与期权做市成本
我们研究了股票市场的高频交易(HFT)如何影响期权市场的流动性。我们发现,股票市场中高频交易活动的增加通过两个主要渠道导致期权市场的买卖价差扩大。首先,期权做市商的报价面临 HFT 利用看跌-看涨平价违规行为的狙击风险。其次,期权市场上的知情交易进一步扩大了股票市场上的 HFT 对期权流动性的影响,因为它同时扩大了期权的买卖价差,并加剧了相关市场上激进的 HFT 活动。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
求助全文
约1分钟内获得全文 去求助
来源期刊
CiteScore
15.80
自引率
4.50%
发文量
192
审稿时长
37 days
期刊介绍: The Journal of Financial Economics provides a specialized forum for the publication of research in the area of financial economics and the theory of the firm, placing primary emphasis on the highest quality analytical, empirical, and clinical contributions in the following major areas: capital markets, financial institutions, corporate finance, corporate governance, and the economics of organizations.
期刊最新文献
Information sharing in financial markets From employee to entrepreneur: The role of unemployment risk The moral preferences of investors: Experimental evidence Robustness and dynamic sentiment Credit supply and house prices: Evidence from mortgage market segmentation
×
引用
GB/T 7714-2015
复制
MLA
复制
APA
复制
导出至
BibTeX EndNote RefMan NoteFirst NoteExpress
×
×
提示
您的信息不完整,为了账户安全,请先补充。
现在去补充
×
提示
您因"违规操作"
具体请查看互助需知
我知道了
×
提示
现在去查看 取消
×
提示
确定
0
微信
客服QQ
Book学术公众号 扫码关注我们
反馈
×
意见反馈
请填写您的意见或建议
请填写您的手机或邮箱
已复制链接
已复制链接
快去分享给好友吧!
我知道了
×
扫码分享
扫码分享
Book学术官方微信
Book学术文献互助
Book学术文献互助群
群 号:481959085
Book学术
文献互助 智能选刊 最新文献 互助须知 联系我们:info@booksci.cn
Book学术提供免费学术资源搜索服务,方便国内外学者检索中英文文献。致力于提供最便捷和优质的服务体验。
Copyright © 2023 Book学术 All rights reserved.
ghs 京公网安备 11010802042870号 京ICP备2023020795号-1