The Impact of High-Frequency Trading on Market Liquidity and Price Efficiency in the Indian Stock Market.
Author(s):
Dr. Vikas Kumar Jaiswal
Keywords:
High-frequency trading (HFT), Market liquidity, Trading volume, Price efficiency, Price discovery, Market stability, Volatility, Flash crashes, Regulatory measures, Trading costs
Abstract
This research study examines the impact of high-frequency trading (HFT) on market liquidity and price efficiency in the Indian stock market, specifically focusing on the Nifty index. By analysing a comprehensive dataset of Nifty companies, one aim to shed light on the implications of HFT for market dynamics in the Indian context. Using regression analysis, one investigate the relationship between HFT participation ratio, trading volume, bid-ask spread, and price efficiency. Our findings reveal that HFT participation has a significant positive association with trading volume, indicating its influence on market activity. Furthermore, one observe a negative relationship between HFT participation and bid-ask spread, suggesting that HFT may contribute to reduced transaction costs and tighter spreads. We also conduct a correlation analysis to assess the interplay among these variables. The correlation matrix highlights the relationships between HFT participation ratio, trading volume, bid-ask spread, and price efficiency. The results indicate that higher trading volume is positively correlated with HFT participation, while bid-ask spread and price efficiency exhibit negative correlations with HFT participation. These findings contribute to the understanding of the impact of HFT on market liquidity and price efficiency in the Indian stock market, specifically within the Nifty index. The insights gained from this research can inform market participants, regulators, and policymakers about the implications of HFT and aid in the development of appropriate measures to maintain a fair and efficient market environment
Article Details
Unique Paper ID: 161127

Publication Volume & Issue: Volume 10, Issue 2

Page(s): 653 - 661
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