Michael Brolley

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Order Flow Segmentation, Liquidity and Price Discovery: The Role of Latency Delays

Staff Working Paper 2018-16 Michael Brolley, David A. Cimon
Latency delays—known as “speed bumps”—are an intentional slowing of order flow by exchanges. Supporters contend that delays protect market makers from high-frequency arbitrage, while opponents warn that delays promote “quote fading” by market makers. We construct a model of informed trading in a fragmented market, where one market operates a conventional order book and the other imposes a latency delay on market orders.

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