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IIROC publishes further academic paper on impact of HFT

First Published 9th March 2015

Results to shed light on impact of dark rules on market quality and integrity.

Toronto, Ontario - The Investment Industry Regulatory Organization of Canada (IIROC) has published the first of two academic papers from the fourth academic team chosen to assess the impact of high frequency trading (HFT) and related activity on Canadian equity markets, as part of the final phase of IIROC's comprehensive HFT Study.

Summarised findings:

1. The introduction of the minimum price improvement rule led to a

significant decline in dark trading volume.

2. The effect of the minimum price improvement rule on dark trading

critically depends on the nature of liquidity provision on the affected


3. We find no evidence that the change in dark trading volume is

associated with market-wide changes in price efficiency.

4. We find little or no evidence that the change in dark liquidity rules

has substantially affected trading costs, market-wide or for individual

trader groups.

5. The change in dark liquidity rules was associated with a

redistribution of marketable retail order flow, which appears to have

increased exchange fees incurred by retail brokers.

6. The segmentation of order flow affects market quality, and in

particular the segregation of retail order flow may harm lit market


The full report can be found here.