Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/173265 
Year of Publication: 
2017
Series/Report no.: 
WZB Discussion Paper No. SP II 2017-502
Publisher: 
Wissenschaftszentrum Berlin für Sozialforschung (WZB), Berlin
Abstract: 
Several financial exchanges have recently introduced messaging delays (e.g., a 350 microsecond delay at IEX and NYSE American) intended to protect ordinary investors from high-frequency traders who exploit stale orders. We propose an equilibrium model of this exchange design as a modification of the standard continuous double auction market format. The model predicts that a messaging delay will generally improve price efficiency and lower transactions cost but will increase queuing costs. Some of the predictions are testable in the field or in a laboratory environment.
Subjects: 
market design
high-frequency trading
continuous double auction
IEX
lab experiments
JEL: 
C91
D44
D47
D53
G12
G14
Document Type: 
Working Paper

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