19 May 2017

Revealing HFT Provisions of Liquidity with Visualization in R

Overview:


1. Liquidity provision over time of HFTs


2. Long-term liquidity provision in a network of trading agents


3. Flurries in trading activity and price changes


A few measures of liquidity


  • The size of the bid-ask spread


  • Transactional costs


  • The passive and aggressive sides of a trade

A few measures of liquidity


  • The size of the bid-ask spread


  • Transactional costs


  • The passive and aggressive sides of a trade
    • More directly related to the behaviour of the broker
    • Difficult to measure without persistent broker identification or an unfragmented market (which we have)

Passive and Aggressive Orders

Passive and Aggressive Orders

The dataset

  • All Trades during normal trading hours on the ASX over one year around 2013 (Here we examine a representative subset of 5 high market cap stocks)
##          Date         Time BuyerID SellerID  Price Volume   Qualifier
## 1: 2013-05-17 11:10:02.115       A        B $21.05    100 Passive Buy
## 2:        ...          ...     ...      ...    ...    ...         ...
  • Identifiers for the buyer and seller of trades
  • Trades are marked with the aggressive/passive agent
  • Australian market is relatively unfragmented meaning that this dataset captures an almost complete picture of trading activity

  • We follow 8 known proprietary HFTs (De-identified)

Broker A (the smallest of the HFTs) makes liquidity (green) for ~50 days, then takes liquidity (brown) until Day ~160 before exiting the market