Rent seeking by low-latency traders: evidence from trading on macroeconomic announcements

Chordia, Tarun, Green, T Clifton and Kottimukkalur, Badrinath 2018, Rent seeking by low-latency traders: evidence from trading on macroeconomic announcements, Review of financial studies, vol. 31, no. 12, pp. 4650-4687, doi: 10.1093/rfs/hhy025.

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Title Rent seeking by low-latency traders: evidence from trading on macroeconomic announcements
Author(s) Chordia, Tarun
Green, T Clifton
Kottimukkalur, Badrinath
Journal name Review of financial studies
Volume number 31
Issue number 12
Start page 4650
End page 4687
Total pages 38
Publisher Oxford University Press
Place of publication Oxford, Eng.
Publication date 2018-12
ISSN 0893-9454
1465-7368
Keyword(s) E-mini future (ES)
S&P 500 exchange-traded fund (SPY)
macroeconomic announcement surprises
trading intensity
speed of information
trading
access to information
Summary Prices of the highly liquid S&P 500 exchange-traded fund (SPY) and the E-mini future (ES) respond to macroeconomic announcement surprises within five milliseconds, with trading intensity increasing over 100-fold following the news release. However, profits from trading quickly are relatively small, roughly

$\$$ 19,000 (⁠ $\$$ 50,000) per event for SPY (ES). Although the speed of information incorporation has increased in recent years, profits have not. Order flow has become less informative, consistent with prices responding directly to news rather than indirectly through trading. Our evidence indicates that low-latency liquidity demanders do not benefit materially from short-term monopolistic access to information.
Language eng
DOI 10.1093/rfs/hhy025
Field of Research 1402 Applied Economics
1502 Banking, Finance And Investment
1401 Economic Theory
HERDC Research category C1.1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2018, The Author(s)
Persistent URL http://hdl.handle.net/10536/DRO/DU:30119623

Document type: Journal Article
Collections: Faculty of Business and Law
Department of Finance
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