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An international trend in market design: Endogenous effects of limit order book transparency on volatility, spreads, depth and volume

Citation

Pham, TP and Westerholm, PJ, An international trend in market design: Endogenous effects of limit order book transparency on volatility, spreads, depth and volume, Journal of International Financial Markets, Institutions and Money, 27 pp. 202-223. ISSN 1042-4431 (2013) [Refereed Article]

Copyright Statement

Copyright 2013 Elsevier B.V.

Official URL: http://dx.doi.org/10.1016/j.intfin.2013.09.0...

DOI: doi:10.1016/j.intfin.2013.09.006

Abstract

Following other leading international securities markets, the Tokyo Stock Exchange (TSE) has adopted a publicly displayed but anonymous limit order book, and we ask: how is market quality afected? Accountng for fixed effects and endogeneity, we find increased volatility and higher order book depth at the best bid and ask prices, while total depth is not significantly impacted. This predicts more competitive order strategies in a trading system with anonymous orders but with more visible price levels. Spreads are found to be unaffected by the market design change, in contradiction to previous literature. Complementing the literature, we find volume increases, indicatng that the aggregate effect of the design change is positive.

Item Details

Item Type:Refereed Article
Keywords:Market quality; Limit order book; Transparency
Research Division:Economics
Research Group:Applied Economics
Research Field:Financial Economics
Objective Division:Economic Framework
Objective Group:Macroeconomics
Objective Field:Fiscal Policy
Author:Pham, TP (Dr Phuong Pham)
ID Code:87744
Year Published:2013
Deposited By:Economics and Finance
Deposited On:2013-12-04
Last Modified:2017-01-23
Downloads:0

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