The impact of high speed quoting on execution risk dynamics: Evidence from interest rate futures markets

Nie, Jing; Malagon, Juliana; Williams, Julian

Abstract

This paper intends to characterize the effect of high-frequency quoting (HFQ) on the execution risk of Eurodollar futures. We construct a unique data set to capture the quoting and trading activities within the limit order book, which allows us to classify the realised fraction of HFQ activity within the market. We then estimate the marginal effect of the HFQ fraction on the execution risk through a novel semi-parametric regression. The results suggest that the effect of HFQ on market quality is nonlinear with critical saturation levels. The HFQ effects on market quality seem to disappear once certain critical points are reached.

Citation

Nie, J., Malagon, J., & Williams, J. (2022). The impact of high speed quoting on execution risk dynamics: Evidence from interest rate futures markets. Journal of Futures Markets, 42(8), 1434-1465. https://doi.org/10.1002/fut.22339

• Journal Article Type: Article
• Acceptance Date: Apr 21, 2022
• Online Publication Date: May 16, 2022
• Publication Date: 2022-08
• Deposit Date: Jun 27, 2022
• Publicly Available Date: May 17, 2024
• Journal: Journal of Futures Markets
• Print ISSN: 0270-7314
• Electronic ISSN: 1096-9934
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 42
• Issue: 8
• Pages: 1434-1465
• DOI: https://doi.org/10.1002/fut.22339
• Public URL: https://durham-repository.worktribe.com/output/1200068