Abstract
We examine the effect of high-frequency trading (HFT) on the price volatility of Euronext-listed stocks. Under stable market conditions, greater HFT intensity is associated with decreased stock price volatility. However, during periods of intraday crashes, rapid interactions between HFT algorithms lead to high rates of order cancellations and simultaneous withdrawals of high-frequency traders from the limit order book. High-frequency traders submit aggressive orders during these periods and consume more liquidity than they provide, resulting in increased stock price volatility.
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