Slow-Moving Capital and Execution Costs: Evidence from a Major Trading Glitch

摘要: We investigate the impact of an exogenous trading glitch at a high-frequency market-making firm on standard measures stock liquidity (effective and realized spreads) as well institutional costs (Implementation Shortfall VWAP slippage) obtained from proprietary data set. find that stocks in which accumulated large positions result become substantially more illiquid day glitch. Effective spreads revert very quickly suggesting market is resilient. Instead, remain significantly higher for than one week. further document all was designated maker illiquid, even if they were not heavily traded during glitch, two days prior to being reassigned another maker. These findings are broadly consistent with 'slow-moving capital' theories suggest 'flash crashes' may be associated significant difficult detect using measures.