High-frequency market making to large institutional trades

Robert A. Korajczyk, Dermot Murphy*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

50 Scopus citations


We study market-making high-frequency trader (HFT) dynamics around large institutional trades in Canadian equities markets using order-level data with masked trader identification. Following a regulatory change that negatively affected HFT order activity, we find that bid-ask spreads increased and price impact decreased for institutional trades. The decrease in price impact is strongest for informed institutional traders. During institutional trade executions, HFTs submit more same-direction orders and increase their inventory mean reversion rates. Our evidence indicates that high-frequency trading is associated with lower transaction costs for small, uninformed trades and higher transaction costs for large, informed trades.

Original languageEnglish (US)
Pages (from-to)1034-1067
Number of pages34
JournalReview of Financial Studies
Issue number3
StatePublished - Mar 1 2019

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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