The impact of fragmentation, exchange fees and liquidity provision on market quality

被引:24
作者
Aitken, Michael [1 ]
Chen, Haoming [2 ]
Foley, Sean [3 ]
机构
[1] Macquarie Univ, Macquarie Grad Sch Management, N Ryde, NSW, Australia
[2] Univ New South Wales, UNSW Business Sch, Sydney, NSW, Australia
[3] Univ Sydney, Fac Business, Finance Discipline, Sydney, NSW, Australia
关键词
Competition; Fragmentation; Queue jumping; Trading fees; ORDER FLOW; EXECUTION COSTS; COMPETITION; DARK; TRANSPARENCY; VOLUME;
D O I
10.1016/j.jempfin.2016.10.002
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
摘要
We analyse the impact of two major financial frictions on market quality in a high-frequency environment: market fragmentation and exchange fees. We find fragmentation significantly improves market quality, with benefits increasing with greater fragmentation. Fragmentation significantly reduces spreads for stocks that are least constrained by the minimum tick size, whilst constrained stocks experience significant increases in depth. Using high-frequency data we document cross-market liquidity dynamics, demonstrating that entrant markets need to trade (not only quote) in order to improve liquidity, and that endogenous liquidity suppliers increase their usage of the alternate market when queues on the incumbent exchange are long and quoted spreads are constrained by the minimum tick size, consistent with queue-jumping order duplication.
引用
收藏
页码:140 / 160
页数:21
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