L10 - General
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High-Frequency Trading and Institutional Trading Costs
Using bond futures data, we test whether high-frequency trading (HFT) is engaging in back running, a trading strategy that can create costs for financial institutions. We reject the hypothesis of back running and find instead that HFT mildly improves trading costs for institutions. -
May 11, 2017 The Digital Economy
Digital technologies—cloud computing, the Internet of Things, advanced robotics, big data analytics, artificial intelligence and machine learning, social media, 3D printing, augmented reality, virtual reality, e-money and distributed ledgers—are transforming the way busi-nesses operate. How does this transformation compare with past industrial revolutions? How are digital technologies changing production systems across industries? Agile firms that use knowledge intensively and have high levels of both organizational and human capital appear set to realize the greatest benefits from digitalization. Finally, what are the implications for productivity, labour markets, inflation and monetary policy as we transition to the digital economy? -
Banking Regulation and Market Making
We present a model of market makers subject to recent banking regulations: liquidity and capital constraints in the style of Basel III and a position limit in the style of the Volcker Rule. -
Options Decimalization
We document the outcome of an options decimalization pilot on Canada’s derivatives exchange. Decimalization improves measures of liquidity and price efficiency. The impact differs by the moneyness of an option and is greatest for out-of-the-money options. -
Retail Order Flow Segmentation
In August 2012, the New York Stock Exchange launched the Retail Liquidity Program (RLP), a trading facility that enables participating organizations to quote dark limit orders executable only by retail traders. -
November 13, 2014 Firm Strategy, Competitiveness and Productivity: The Case for Canada
At a time when the Bank is expecting a rotation of demand toward exports and investment, and transformative global trends are placing increasing emphasis on innovation, technology and organizational learning, an understanding of the competitiveness strategies of Canadian firms and the factors affecting them has become particularly relevant. This article summarizes findings from a Bank of Canada survey of 151 firms designed to extract signals on elements of firm strategy and organizational capital in order to help inform the macroeconomic outlook. -
Ownership Concentration and Competition in Banking Markets
Many countries prohibit large shareholdings in their domestic banks.The authors examine whether such a restriction restrains competition in a duopolistic loan market. Blockholders may influence managers' output decisions by choosing capital structure, as in Brander and Lewis (1986).