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Please use this identifier to cite or link to this item: http://arks.princeton.edu/ark:/88435/dsp01g732d914w
Title: THE IMPACT OF HIGH-FREQUENCY TRADING REGULATORY REGIMES ON EUROPEAN MARKET QUALITY
Authors: Musella, Francis
Advisors: Redding, Stephen
Department: Economics
Class Year: 2014
Abstract: I examine the impact of three different national regimes for regulating high-frequency trading: a licensure regime in Germany, establishment of an HFT order cancellation tax in Italy, and a combined order cancellation tax and general financial transactions tax in France. Using GARCH and EGARCH models, I find that the German regime significantly reduces the persistence of volatility shocks. The French regime significantly reduces long-run volatility, reduces the size of bid-ask spreads, and increases intraday volatility. It also weakly reduces volatility persistence and the sensitivity of bid-ask spreads to volatility. The Italian regime significantly reduces long-run volatility, increases the persistence of volatility shocks, increases intraday volatility, and reduces the sensitivity of bid-ask spreads to volatility. It weakly increases the size of bid-ask spreads. The French and German regimes were associated with a significant reduction in trade volume, which was not the case with the Italian regime. Overall, I find that the three regimes improve market quality more often than they detract from it.
Extent: 64 pages
URI: http://arks.princeton.edu/ark:/88435/dsp01g732d914w
Type of Material: Princeton University Senior Theses
Language: en_US
Appears in Collections:Economics, 1927-2016

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