Publications
Need for Speed? Exchange Latency and Liquidity, 2017, with Albert J. Menkveld
Review of Financial Studies, 30 (2017), 1188--1228 [slides] [Bloomberg, VoxEU coverage]
Review of Financial Studies, 30 (2017), 1188--1228 [slides] [Bloomberg, VoxEU coverage]
Speeding up the exchange does not necessarily improve liquidity. Since HFTs employ both market-making and arbitrage strategies, the net effect of a faster market depends on a security’s news-to-liquidity-trader ratio.
Too-International-to-Fail? Supranational Bank Resolution and Market Discipline, 2016, with Lucy Gornicka
Journal of Banking and Finance 65 (2016), 41--58 [slides] [VoxEU coverage]
Journal of Banking and Finance 65 (2016), 41--58 [slides] [VoxEU coverage]
Supranational regulators are more inclined to bail-out banks indebted towards international creditors because they take into account cross-border contagion. When banks' creditors are more likely to be bailed out, market discipline decreases.
Working papers
Blockchain technology allows for flexible settlement of trades. We build a model of intermediated trading with search frictions and counterparty risk. On the one hand, longer trade-to-settlement time increases exposure to counterparty risk. On the other hand, liquidity improves since intermediaries have more time to adjust inventories.
Beyond the Frequency Wall: Speed and Liquidity on Batch Auction Markets, 2016, with Marlene Haas
[The Conversation (French) coverage] [Josseph de la Vega Award 2016]
[The Conversation (French) coverage] [Josseph de la Vega Award 2016]
A batch auction market does not necessarily improve liquidity relative to continuous-time trading. The HFT ``arms' race'' stimulates price competition between arbitrageurs, generating a lower spread.
Does Central Clearing Affect Price Stability? Evidence from Nordic Equity Markets, 2015, with Albert J. Menkveld and Emiliano Pagnotta, R&R at Journal of Financial Economics
We provide evidence of the effects of introducing a central clearing counterparty (CCP) on price stability using a 2009 clearing reform in three Nordic equity markets. We find that volatility drops by 8.8% relative to pre-reform levels.