High-Frequency Traders First Go Against Order Flow, Study Shows
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High-frequency traders are more prone to first go against the flow of orders by large institutions, according to a study based on trade data provided by investors including Norway’s $890 billion wealth fund.
The study found that HFTs “lean against the order” in the first hour and then turn around and go with the flow in the case of multi-hour trades, the study by University of Amsterdam professors Vincent van Kervel and Albert J. Menkveld released Thursday showed. Trading costs are 39 percent lower when the HFTs lean against the order, “by one standard deviation,” and 64 percent higher when they go with it, they said.