Latency reduction and market quality: the case of the Australian Stock Exchange

Murray, Hamish, Pham, Thu Phuong and Singh, Harminder 2016, Latency reduction and market quality: the case of the Australian Stock Exchange, International review of financial analysis, vol. 46, pp. 257-265, doi: 10.1016/j.irfa.2015.09.001.

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Title Latency reduction and market quality: the case of the Australian Stock Exchange
Author(s) Murray, Hamish
Pham, Thu Phuong
Singh, HarminderORCID iD for Singh, Harminder
Journal name International review of financial analysis
Volume number 46
Start page 257
End page 265
Total pages 9
Publisher Elsevier
Place of publication Amsterdam, The Netherlands
Publication date 2016-07
ISSN 1057-5219
Keyword(s) latency
market liquidity
Summary This study investigates the role of latency in market quality in the Australia Securities Exchange following the introduction of the Integrated Trading Platform (ITS) and ASXTrade. We find that the reduction in system latency from 70. ms to 30. ms (ITS) improved liquidity. However, the lower latency has not had a long-lasting downward effect on spreads, as there was no discernible reduction in trading costs when institutional traders already had access to lower-latency co-locations. We contribute to the literature by reporting that low latency improves market liquidity, but privileged participants that have access to trading information prior to others may induce greater information asymmetry and adverse selection.
Language eng
DOI 10.1016/j.irfa.2015.09.001
Field of Research 150299 Banking, Finance and Investment not elsewhere classified
1502 Banking, Finance And Investment
1501 Accounting, Auditing And Accountability
1801 Law
Socio Economic Objective 970115 Expanding Knowledge in Commerce
HERDC Research category C1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2015, Elsevier
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Document type: Journal Article
Collection: Department of Finance
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