Are Large Traders Harmed by Front-running HFTs?
Trading and Market Microstructure
2023-07-28 v2 General Economics
Economics
Mathematical Finance
Abstract
This paper studies the influences of a high-frequency trader (HFT) on a large trader whose future trading is predicted by the former. We conclude that HFT always front-runs and the large trader is benefited when: (1) there is sufficient high-speed noise trading; (2) HFT's prediction is vague enough. Besides, we find surprisingly that (1) making HFT's prediction less accurate might decrease large trader's profit; (2) when there is little high-speed noise trading, although HFT nearly does nothing, the large trader is still hurt.
Cite
@article{arxiv.2211.06046,
title = {Are Large Traders Harmed by Front-running HFTs?},
author = {Ziyi Xu and Xue Cheng},
journal= {arXiv preprint arXiv:2211.06046},
year = {2023}
}