Albert Menkveld – Do Market Makers Improve Markets?

Prof. Albert Menkveld joins The Sophron® Network to discuss what high-frequency traders actually do for, and to, the rest of the market. He explains how a fast market maker made it possible for a second venue to compete and halved bid-ask spreads, why spending on speed keeps quotes tight, and when the same fast traders turn against a large institutional order. Albert Menkveld is Professor of Finance at the Vrije Universiteit Amsterdam and a research fellow at the Tinbergen Institute. He wrote the first study of a high-frequency market maker seen through its own trades, and High-Frequency Trading around Large Institutional Orders with Vincent van Kervel in the Journal of Finance. He was President of the European Finance Association in 2024, is a member of the Royal Netherlands Academy of Arts and Sciences, sits on the Capital Market Committee of the AFM, and spent five years at KLM before academia, ending as investor relations manager. We also discuss his work on AI "errors", news traders versus value traders in EURO STOXX 50 futures, back running, persuasive AI and clearing. ### Follow Albert Menkveld LinkedIn: https://www.linkedin.com/in/albertjmenkveld/ Bluesky: https://bsky.app/profile/albertjmenkveld.com Papers: https://albertjmenkveld.com Microstructure course: https://microstructure-course.com/ ### Core Timestamps 00:00 - Cold open 00:56 - Welcome and introduction 03:30 - AI "errors": the machines versus 164 human teams 07:26 - From KLM investor relations to a PhD 09:16 - Amsterdam or New York: where is a stock priced? 10:28 - Fragmentation and where information starts 12:39 - Why two markets can beat one 17:07 - Earning the spread, losing on the position 18:52 - The speed race and tight spreads 21:36 - Precise or fast: AI in the quote engine 23:51 - AI has been in trading for years 25:01 - How many venues are too many? 27:29 - Does news trading crowd out value trading? 32:10 - Why the CAPM has no trading in it 36:44 - High-frequency traders around large institutional orders 39:40 - Back running 42:40 - What is next: persuasive AI and clearing 46:29 - The microstructure course ### Connect With Us Instagram: https://instagram.com/amsterdaminvest LinkedIn: https://linkedin.com/company/amsterdam-investment-club X: https://x.com/amsterdaminvest Subscribe for more conversations at the intersection of markets, research, and technology.