Effects of Lit and Dark Market Fragmentation on Liquidity
Gresse, Carole (2017), Effects of Lit and Dark Market Fragmentation on Liquidity, Journal of Financial Markets, 35, p. 1-20. 10.1016/j.finmar.2017.05.003
TypeArticle accepté pour publication ou publié
Journal nameJournal of Financial Markets
MetadataShow full item record
Dauphine Recherches en Management [DRM]
Abstract (EN)Based on data from eight exchanges and a trade reporting facility for a large sample of LSE- and Euronext-listed equities, this article investigates how lit and dark market fragmentation affects liquidity on the primary exchange and across markets. Fragmentation between lit order books is found to improve liquidity, with greater benefits for large stocks and stocks with less electronic trading. When algorithmic trading (AT) is controlled for: (1) spreads decrease with both lit fragmentation and AT but the impact of fragmentation is greater; (2) lit fragmentation increases depth across markets without reducing it on the primary exchange, while AT has a negative impact on depth. Dark trading is associated with greater depth but wider quoted spreads, the combination of both effects being neutral for effective spreads.
Subjects / KeywordsAlgorithmic trading; Fragmentation; Dark trading; Multilateral Trading Facility (MTF); Internalization; Liquidity; OTC trading
Showing items related by title and author.
Gresse, Carole (2013-06) Communication / Conférence
Effects of the Competition between Multiple Trading Platforms on Market Liquidity : Evidence from the MiFID Experience Gresse, Carole (2011) Communication / Conférence
Direct and Indirect Effects of Index ETFs on Spot-Futures Pricing and Liquidity : Evidence from the CAC 40 Index de Séverac, Béatrice; Deville, Laurent; Gresse, Carole (2014) Article accepté pour publication ou publié
How does the Introduction of an ETF Market with Liquidity Providers Impact the Liquidity of the Underlying Stocks? Platten, Isabelle; Gresse, Carole; De Winne, Rudy (2009-09) Communication / Conférence
Gresse, Carole (2014) Chapitre d'ouvrage