High frequency market making: The role of speed

Yacine Aït-Sahalia, Mehmet Sağlam

Research output: Contribution to journalArticlepeer-review

4 Scopus citations


We propose a model where a strategic high frequency market maker exploits his speed and informational advantages to place quotes that interact with the market orders of low frequency traders. We characterize the optimal market making policy and the equilibrium that results. The model has testable implications regarding the impact of speed on the provision of liquidity. We test these implications by taking advantage of a natural experiment on the NYSE American stock exchange, which implemented an intentional delay in 2017 then removed it in 2019. We find broad agreement between the empirical evidence and the implications of the model.

Original languageEnglish (US)
Article number105421
JournalJournal of Econometrics
Issue number2
StatePublished - Feb 2024

All Science Journal Classification (ASJC) codes

  • Applied Mathematics
  • Economics and Econometrics


  • High frequency trading
  • Inventory control
  • Liquidity
  • Market making
  • Market quality
  • Speed bump
  • Stochastic optimal control


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