Trading Large Orders in the Presence of Multiple High-Frequency Anticipatory Traders

Ziyi Xu; Xue Cheng

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arXiv · 2403.08202

Trading Large Orders in the Presence of Multiple High-Frequency Anticipatory Traders

Ziyi Xu·Xue Cheng

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Abstract

We investigate a market with a normal-speed informed trader (IT) who may employ mixed strategy and multiple anticipatory high-frequency traders (HFTs) who are under different inventory pressures, in a three-period Kyle's model. The pure- and mixed-strategy equilibria are considered and the results provide recommendations for IT's randomization strategy with different numbers of HFTs. Some surprising results about investors' profits arise: the improvement of anticipatory traders' speed or a more precise prediction may harm themselves but help IT.

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Ziyi Xu, Xue Cheng. 2024-03-13. Trading Large Orders in the Presence of Multiple High-Frequency Anticipatory Traders. https://arxiv.org/abs/2403.08202

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