  Many empirical studies have discussed market liquidity, which is regarded as
a measure of a booming financial market. Further, various indicators for
objectively evaluating market liquidity have also been proposed and their
merits have been discussed. In recent years, the impact of high-frequency
traders (HFTs) on financial markets has been a focal concern, but no studies
have systematically discussed their relationship with major market liquidity
indicators, including volume, tightness, resiliency, and depth. In this study,
we used agent-based simulations to compare the major liquidity indicators in an
artificial market where an HFT participated was compared to one where no HFT
participated. The results showed that all liquidity indicators in the market
where an HFT participated improved more than those in the market where no HFT
participated. Furthermore, as a result of investigating the correlations
between the major liquidity indicators in our simulations and the extant
empirical literature, we found that market liquidity can be measured not only
by the major liquidity indicators but also by execution rate. Therefore, it is
suggested that it could be appropriate to employ execution rate as a novel
liquidity indicator in future studies.
