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The Impact of Dark and Visible Fragmentation on Market Quality... (2011) Open access

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Title The Impact of Dark and Visible Fragmentation on Market Quality (Replaces CentER Discussion Paper 2011-051)
Published in CentER Discussion Paper, Vol. 2011-069.
Author Degryse, H.A.; Jong, F.C.J.M. de; Kervel, V.L. van
Date 2011
Reference(s) Market microstructure, Market fragmentation, Liquidity, MiFID, Market microstructure, Market fragmentation, Liquidity, MiFID
Language English
Type Working paper
Publisher Tilburg University. Center for Economic Research
Abstract Two important characteristics of current European equity markets are rooted in changes in financial regulation (the Markets in Financial Instruments Directive). The regulation (i) allows new trading venues to emerge, generating a fragmented market place and (ii) allows for a substantial fraction of trading to take place in the dark, outside publicly displayed order books. This paper evaluates the impact on liquidity of fragmentation in visible order books and dark trading for a sample of 52 Dutch stocks. We consider global liquidity by consolidating the entire limit order books of all visible European trading venues, and local liquidity by considering the traditional market only. We find that fragmentation in visible order books improves global liquidity, but dark trading has a detrimental effect. In addition, local liquidity is lowered by fragmentation in visible order books.
Publication http://repository.uvt.nl/id/ir-uvt-nl:oai:wo.uvt.nl:4774730
Persistent Identifier urn:nbn:nl:ui:12-4774730
Metadata XML
Repository Tilburg University

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