The behaviour of high-frequency traders under different market stress scenarios

This empirical study on European stocks gives evidence about the practices of high-frequency traders (HFTs) under market stress. In the absence of significant news, whatever the market conditions, they are the main... [ view full abstract ]

This empirical study on European stocks gives evidence about the practices of high-frequency traders (HFTs) under market stress. In the absence of significant news, whatever the market conditions, they are the main contributors to liquidity with a participation of 80% in the market depth. They constitute 60% of the traded amounts, with an aggressive/passive ratio around 53%. We identify a change of regime in the presence of scheduled news that goes beyond the expected reaction to volatility variations. Moreover, in extreme situations, when non-HFTs have time to adjust their tactics, they act as liquidity providers in place of HFTs.