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
How fast should trades settle?, 2018, with Mariana Khapko
[slides] [The Conversation (French) coverage]
[slides] [The Conversation (French) coverage]
Does faster settlement benefit markets? Real-time settlement, coupled with a flexible option-like penalty for failures-to-deliver, disciplines competition on securities lending markets, reduces borrowing costs, and therefore improves market quality. Our results support the ongoing reforms around the globe to shorten settlement cycles and offer insights on how to reduce the costs associated with fast settlement.
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.