RT Journal Article
SR Electronic
T1 The Impact of High-Frequency Trading on Australian Futures Market Liquidity and Efficiency
JF The Journal of Derivatives
FD Institutional Investor Journals
SP jod.2020.1.097
DO 10.3905/jod.2020.1.097
A1 Panha Heng
A1 Scott J. Niblock
A1 Jennifer L. Harrison
A1 Hansi Hu
YR 2020
UL https://pm-research.com/content/early/2020/02/14/jod.2020.1.097.abstract
AB This article examines the co-location of high-frequency trading (HFT) facilities and capacity of the Australian futures market to absorb information following major scheduled macroeconomic announcements. The findings show that the co-location of HFT facilities has increased trading activities and liquidity across the four futures contracts investigated. The four futures contracts also demonstrate a market capacity to absorb information from major announcements efficiently. For instance, the majority of price adjustments are impounded within 30 seconds following major announcements. We conclude that abnormal trading profits are unlikely to be generated by HFTs in the Australian futures market.TOPICS: Futures and forward contracts, derivativesKey Findings• The co-location of HFT facilities has increased trading activities and liquidity across the four futures contracts investigated in the Australian futures market.• These futures contracts also demonstrate a market capacity to absorb information from major announcements efficiently.• Abnormal trading profits are unlikely to be generated by HFTs in the Australian futures market.