The Bank of England has just released a new paper titled “High-frequency trading behaviour and its impact on market quality: Evidence from the UK equity market” . The paper is similar to the recent Kirilenko study in that it separates ‘aggressive” and “passive” high frequency traders and it uses data which identifies the counterparties of each transaction.
Before we get into some of the specifics of the paper, it’s important to note how the Bank of England defines HFT:
“The term “HFT” is generally used to describe any trading firm that
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