Bruno Biais, Thierry Foucault et Sophie Moinas, « Equilibrium Fast Trading », IDEI Working Paper, n° 769, mars 2013, révision septembre 2014.


High-speed market connections and information processing improve the ability to seize trading opportunities, raising gains from trade. They also enable fast traders to process information before slow traders, generating adverse selection, and thus negative externalities. When investing in fast trading technologies, institutions do not internalize these externalities. Accordingly, they overinvest in equilibrium. Completely banning fast trading is dominated by offering two platforms: one accepting fast traders, the other banning them. Utilitarian welfare is maximized by having i) a single platform on which fast and slow traders coexist and ii) Pigovian taxes on investment in the fast trading technology


high-frequency trading; externalities; welfare;

Codes JEL

  • D4: Market Structure and Pricing
  • D62: Externalities
  • G1: General Financial Markets
  • G20: General
  • L1: Market Structure, Firm Strategy, and Market Performance

Remplacé par

Bruno Biais, Thierry Foucault et Sophie Moinas, « Equilibrium Fast Trading », Journal of Financial Economics, vol. 116, n° 2, mai 2015, p. 292–313.