@article {Ozenbasjpm.2018.1.081, author = {Deniz Ozenbas and Robert A. Schwartz}, title = {Do High Frequency Trading Firms Provide Two-Sided Liquidity?}, elocation-id = {jpm.2018.1.081}, year = {2018}, doi = {10.3905/jpm.2018.1.081}, publisher = {Institutional Investor Journals Umbrella}, abstract = {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{\textquoteright} 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.}, issn = {0095-4918}, URL = {https://jpm.pm-research.com/content/early/2018/07/13/jpm.2018.1.081}, eprint = {https://jpm.pm-research.com/content/early/2018/07/13/jpm.2018.1.081.full.pdf}, journal = {The Journal of Portfolio Management} }