DescriptionThe first essay studies the roles of trading speed and hidden orders in limit order markets. We develop a model where liquidity suppliers differ in speed of revising their limit orders and have an option of hiding their orders. The model predicts that fast liquidity suppliers bear lower adverse selection risk and therefore submit orders with narrower bid-ask spreads. Slow liquidity suppliers may overcome their speed disadvantage by using hidden orders. We also provide empirical results that support the model. We find that non-high frequency trading firms account for 70% of liquidity provision in hidden executions, and hidden orders have significantly narrower spreads and lower adverse selection risk than visible orders. Our theoretical model and empirical findings suggest that high frequency technology and hidden orders are substitutes in reducing adverse selection risk. The second essay investigates market quality breakdowns in equity markets. A breakdown occurs when an order book thins to the point where extreme price movements are observed. These are frequently reversed as the market learns that nothing fundamental has occurred. The daily average breakdown frequency from 1993-2011 is 0.64%, with averages in 2010-11 below this amount. Controlling for microstructure effects, breakdowns have fallen significantly since Reg NMS. Spikes in market correlation and high frequency trading (HFT) surges make breakdowns more likely. Exchange traded funds (ETFs) break down more often than non-ETFs. Both ETFs and HFT Granger cause market correlation. Breakdowns are predictable for up to two days. The third essay analyzes HFT activity in equities during U.S. Treasury permanent open market (POMO) purchases by the Federal Reserve. We construct a model to study HFT quote and trade behavior when private information is released. We estimate that HFT firms reduce their inside quote participation by up to 8% during POMO auctions. HFT firms trade more aggressively, and they supply less passive liquidity to non-HFT firms. Market impact also rises during Treasury POMO. Aggressive HFT trading becomes more consistently profitable, and HFT firms earn a higher return per share. We also estimate that HFT firms earn profits of over $105 million during U.S. Treasury POMO events.