RT Journal Article SR Electronic T1 Do High Frequency Trading Firms Provide Two-Sided Liquidity? JF The Journal of Portfolio Management FD Institutional Investor Journals SP 63 OP 74 DO 10.3905/jpm.2018.1.081 VO 44 IS 7 A1 Deniz Ozenbas A1 Robert A. Schwartz YR 2018 UL https://pm-research.com/content/44/7/63.abstract AB High-frequency trading (HFT) firms are commonly thought of as the new market makers, although, unlike traditional dealers, they have no affirmative obligation. The authors investigate the quality of HFT-provided liquidity by focusing on whether HFT firms make, with reasonable consistency, two-sided markets. They find that HFT and non-HFT firms contribute approximately equally to liquidity creation, HFT is mostly two-sided, and non-HFT is more one-sided. For the authors’ sample, the two-sided liquidity provision of HFT firms was directed mainly at volatile, large-cap stocks, and it declined sharply during extreme events (i.e., mini flash crashes). Thus, HFT firms appear to be quite selective as market makers.TOPICS: Style investing, volatility measures, VAR and use of alternative risk measures of trading risk