Does Anonymity Matter in Electronic Limit Order Markets?

Foucault, Thierry; Moinas, Sophie; Theissen, Erik

doi:10.1093/rfs/hhm027

Cited by 145 publications

(162 citation statements)

References 51 publications

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“…15 If some liquidity suppliers are informed about the volatility, as in the Foucault et al (2003) model, they may find it optimal to bid less aggressively when they know that the volatility is high.…”

Section: Order Book Slope and Price Volatilitymentioning

confidence: 99%

Order book characteristics and the volume–volatility relation: Empirical evidence from a limit order market

Næs¹,

Skjeltorp²

2006

Journal of Financial Markets

115

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Using unique data, we address the issue of price formation in a limit order market. A standard volume-volatility relation is documented with the number of trades acting as the important component of volume. The main contribution of the paper is to identify strong evidence that volume, volatility, and the volume-volatility relation are negatively related to the order book slope. These results are robust to the inclusion of several liquidity measures. A significant empirical relationship between the order book slope and the coefficient of variation in earnings forecasts by financial analysts suggests that the slope is proxying for disagreement among investors. Hence, our results support models where investor heterogeneity intensifies the volume-volatility relation.

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Section: Order Book Slope and Price Volatilitymentioning

confidence: 99%

Order book characteristics and the volume–volatility relation: Empirical evidence from a limit order market

Næs¹,

Skjeltorp²

2006

Journal of Financial Markets

115

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“…Focault, Moinas and Theissen (2007) analyzed the changes in the Euronext limit order mar-ket after its transition to an anonymous order book on 23 rd April 2001. They found evidence that after this transition the bid-ask spread significantly decreased.…”

Section: Literature Reviewmentioning

confidence: 99%

Pre-Trade Transparency on the Italian Stock Exchange: A Trade Size Model on Panel Data

et al. 2009

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The purpose of this study was to analyze the effects that have been caused by changes in pre-trade transparency upon the behavior of stock traders. We used a trade size model and tested it before, during and after the period when the Italian Stock Exchange introduced a 20-level order book with disaggregated orders. Tick by tick data of the whole set of stocks (up to 277) listed on the Italian Stock Exchange were studied through fixed-effects panel models, within intra day (every 30 minutes and 150 minutes) and daily time frames. Our results indicate that order flows, bidask spreads, levels of risk and some information events differentially affect trade sizes when investors receive better information prior to negotiation. Both (intra day) informed and uninformed traders operating in a more transparent market became more reticent, with reduced trades sizes and higher orders' cancellations. Moreover, it appears that the higher degree of order book disclosure permits traders to downsize their level of risk aversion; i.e. it reduces the 'uncertainty' that would otherwise result in disrupted trading activity under conditions of information opacity.JEL Classification: G14; D03; D82; C23; C82. Key words: pre-trade transparency; trade size; private information; panel data. * We are grateful to Investnet-IW Bank for providing us with the trading platform used to download the data set. We would like also to thank Roberto Golinelli for his useful comments and advice; Massimiliano Ghedini, Ivan Girotto and CINECA for providing a powerful HPC computer to deal the huge dimension of the dataset.

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“…This is true as well for the NASDAQ OMX Nordic's exchanges but that change took place many years ago. Foucault et al (2007) examine the switch to pre-trade anonymity at the Paris Bourse and report improvements in liquidity. Related studies by Comerton-Forde and Tang (2009), Frino et al (2010), and Comerton-Forde et al (2005 examine the effects of changes in the transparency of different markets with respect to the anonymity dimension of transparency.…”

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confidence: 99%

Does Trading Anonymously Enhance Liquidity?

Dennis

Sandås

2014

SSRN Journal

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Does Anonymity Matter in Electronic Limit Order Markets?

Cited by 145 publications

References 51 publications

Order book characteristics and the volume–volatility relation: Empirical evidence from a limit order market

Order book characteristics and the volume–volatility relation: Empirical evidence from a limit order market

Pre-Trade Transparency on the Italian Stock Exchange: A Trade Size Model on Panel Data

Does Trading Anonymously Enhance Liquidity?

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