Publication: Message traffic and short-term illiquidity in high-speed markets
Authors
Abad, David ; Massot, Magdalena ; Nawn, Samarpan ; Pascual, Roberto ; Yagüe, José
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Publisher
Elsevier
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DOI
https://doi.org/10.1016/j.ememar.2024.101251
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info:eu-repo/semantics/article
Description
© 2024 Published by Elsevier B.V. This document is the Published version of a Published Work that appeared in final form in Emerging Markets Review. To access the final edited and published work see https://doi.org/10.1016/j.ememar.2024.101251
Abstract
We examine which components of message traffic in a high-speed equity market, including orders from traders with varying technological capabilities, signal short-term illiquidity. Our findings show that only the unexpected component of high-frequency traders' (HFTs') net buying pressure — arising from both aggressive and non-aggressive orders — predicts increases in immediacy costs and price impacts. Updates to outstanding limit orders, driven by prior efficient pre returns, strengthen the signaling power of HFTs' order flow. Additionally, market-wide HFTs' net buying pressure improves the ability to forecast short-term illiquidity in individual stocks.
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Citation
Emerging Markets Review 65 (2025) 101251
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1-ene-2999
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