Data and methodology guide for the paper “Message Traffic and Short-Term Illiquidity in High-Speed Markets”

This is the data and methodology guide for the paper " Message Traffic and Short-Term Illiquidity in High-Speed Markets", which is published in Emerging Market Review. In this paper, we use detailed message-level data from a high-speed market that flags the orders of high-frequency traders (HFTs), agency algorithmic traders, and non-algorithmic traders to show that only the unexpected part of HFTs’ net buying pressure, computed from the inflow of aggressive and non-aggressive orders, precedes increases in both immediacy costs and price impacts in the short run. Consistent with market-making theories of active risk management, updates of outstanding limit orders relate to preceding efficient price returns and enhance the overall signaling capacity of the HFTs’ order flow. Market-wide HFTs’ net buying pressure adds extra power in anticipating single-stock short-term illiquidity.