abstract
- We study the intra-day trading profits and losses of retail, institutional, and high frequencytraders from 2006 to 2012, usinggranular trader-level data fromthe Toronto Stock Exchange and analyze the evolution in trading costs for traders who trade with both market and limit orders. Retail investors make persistent intra-day trading losses, institutional investors earn positive profits, and high frequency trading (HFT) profits decline over time. HFT activities are associated with a reduction in retail traders ’ liquidity costs and in the trading losses that are attributed to adverse future price movements. Institutional traders ’ profits are positively related to retail trading activities but unrelated to HFT activities. Retail losses add up to almost half a billion dollars over our six year sample, and only a small portion of these losses can be attributed to direct bid-ask spread costs – the remainder are due to adverse intra-day price movements. Financial supportfrom the SSHRC isgratefullyacknowledged. TheTorontoStock Exchange(TSX) and Alpha Trading kindly provided us with databases. The views expressed here are those of the authors and