@inbook{67d94f87f7854d988a7bd730dd2247e0,
title = "High Frequency Trading in the Equity Markets During US Treasury POMO",
abstract = "We analyze high frequency trading (HFT) activity in equities during US Treasury permanent open market (POMO) purchases by the Federal Reserve. We construct a model to study HFT quote and trade behavior when private information is released and confirm it empirically. We estimate that HFT firms reduce their inside quote participation by up to 8% during POMO auctions. HFT firms trade more aggressively, and they supply less passive liquidity to non-HFT firms. Market impact also rises during Treasury POMO. Aggressive HFT trading becomes more consistently profitable, and HFT firms earn a higher return per share. We also estimate that HFT firms earn profits of over $105 million during US Treasury POMO events.",
keywords = "G12, G21, G24",
author = "Cheng Gao and Bruce Mizrach",
note = "Publisher Copyright: {\textcopyright} 2018, Springer Nature Switzerland AG.",
year = "2018",
doi = "10.1007/978-3-319-98714-9_4",
language = "American English",
series = "Dynamic Modeling and Econometrics in Economics and Finance",
publisher = "Springer Science and Business Media Deutschland GmbH",
pages = "81--103",
booktitle = "Dynamic Modeling and Econometrics in Economics and Finance",
address = "Germany",
}