FRIC/Finance Seminar with Andreas Park, University of Toronto
FRIC Center for Financial Frictions and the Department of Finance are proud to announce the upcoming seminar with Andreas Park, University of Toronto.
Andreas Park will present:
Andreas Park, University of Toronto
Katya Malinova, University of Toronto
Ryan Riordan, University of Ontario Institute of Technology
Using a change in regulatory fees in Canada in April 2012 that affected highfrequency quote submissions and cancellations, we analyze the causal impact of algorithmic trading activities on the trading costs and intraday returns of retail and institutional traders. Following the change, the number of trades, quotes, and cancellations dropped by 30% and market-wide bid-ask spreads rose by 9%. Trading costs for market orders, measured by bid-ask spreads, increased for institutions, but remained unaffected for retail traders. Both groups incur higher adverse selection costs on their limit orders. Retail traders’ intraday returns, especially from limit orders, declined, while institutions’ returns from market orders increased.