Pre-trade transparency and market quality

Eom, Kyong Shik; Ok, Jinho; Park, Jong-Ho

doi:10.1016/j.finmar.2007.06.001

Cited by 73 publications

(42 citation statements)

References 29 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Conversely, increased transparency may facilitate collusion between traders by making it easier to infer other participants' strategies, and it also increases the cost of the "free option" problem related to limit orders (Madhavan, Porter and Weaver, 2005). In addition, the relationship between pretrade transparency and market quality is not necessarily a linear one (Eom, Ok and Park, 2007) and it may be affected by factors such as market depth (Frutos and Manzano, 2014).…”

Section: Resultsmentioning

confidence: 99%

The Impact of Stock Market Structure on Volatility: Evidence from a Call Auction Suspension

Camilleri

2015

International Journal of Financial Research

View full text Add to dashboard Cite

ABSTRACT:The purpose of this paper is to investigate the volatility impacts of the suspension of a call auction system by the National Stock Exchange of India (NSE) in June 1999, thus extending prior empirical work relating to this area. The realised volatility on NSE is compared with that of the Bombay Stock Exchange using two volatility proxies: modulus of log returns and scaled intra-day price difference. We also focus on conditional volatility by estimating an AGARCH model on seasonallyadjusted NSE Nifty Index data. Whilst some results yield contrasting inferences, the overall outcomes indicate that volatility was higher during the auction period, and we do not find any evidence that supports the foreseen benefits of auction frameworks. Results reinforce the idea that market designers should think about the possible interactions with subsidiary market microstructure features when formulating auction protocols, since the latter may compromise auction efficacy.

show abstract

Section: Resultsmentioning

confidence: 99%

The Impact of Stock Market Structure on Volatility: Evidence from a Call Auction Suspension

Camilleri

2015

International Journal of Financial Research

View full text Add to dashboard Cite

show abstract

“…Numerous measures of market quality are used in the microstructure literature, including such measures as spreads, depth, volatility, price impact, price efficiency, market efficiency, execution speed, order flow fragmentation, speed of price adjustment, locked/crossed markets, and market quality index (Theobald & Yallup, 2004;Bennett & Wi, 2006;Zhao & Chung, 2007;Eom, Ok, & Park, 2007;Hendershott & Jones, 2008;Alexander & Peterson, 2008;Shkilko, Van Ness, & Van Ness, 2008). Since the Rule 605 data contains market quality characteristics on spreads, rate of price improvement, amount of price improvement, and fragmentation of order flow, this study focuses on these measures of market quality.…”

Section: Methodsmentioning

confidence: 99%

The Relationship between Listing Requirements and Market Quality: An Examination Using NASDAQ’s Tiered Market Structure

Broom¹,

Turner²

2016

International Journal of Financial Research

View full text Add to dashboard Cite

This study examines the relationship between listing requirements and market quality. Related studies analyzed market quality by focusing on disclosure requirements, while neglecting potential effects from listing requirements. Most of these studies failed to control for different market structures, thereby creating joint hypothesis problems. Using the unique structure of NASDAQ, We examine market quality while controlling for disclosure requirements and market structure. We find a significant relationship exists between listing requirements and four measures of market quality. The results indicate that listing requirements represent the types of information revealed, whereas disclosure requirements represent the mechanism through which markets reveal information.

show abstract

“…Boehmer, Saar and Yu (2005) find that the introduction of NYSE's OpenBook service, which provides limit-order book information, decreases the price impact of orders and improves the informational efficiency of prices. Eom, Ok and Park (2007) find that market stability and informational efficiency of the price are improved when the Korea Exchange increases the number of publicly disclosed quotes. On the other hand, Madhavan, Porter and Weaver (2005) find that increased pre-trade transparency leads to higher trading costs and volatility after the Toronto Stock Exchange disseminated realtime information on its limit order book to the public.…”

Section: Related Literaturementioning

confidence: 96%

Pre-Trade Transparency in Over-the-Counter Markets

Fan

Zhong

2012

SSRN Journal

View full text Add to dashboard Cite

To understand whether and how pre-trade transparency would affect over-the-counter markets, we construct a search model and test our model implications in corporate bond markets. Based on our search model, we argue that the increase in pre-trade information, which refines traders' information sets, enhances traders' bargaining positions relative to dealers'. Thus, traders' transaction costs measured by bid-ask spreads are reduced. Smaller bid-ask spreads induce more traders to participate, and hence, lead to an increase in market liquidity. Our model is novel in that we consider traders' lack of pre-trade information as Knightian uncertainty. In other words, the unavailability of pre-trade information impedes the formation of a unique prior for traders.Our model implications are supported through a controlled experiment on the corporate bond market. Using propensity score matching to construct groups of bonds with and without pre-trade information, we find that the average effective bid-ask spread is 11 basis points lower on pretrade transparent bonds. This means that a minimum of $930 million would be saved annually on transaction costs if pre-trade transparency had been enforced. 1

show abstract

Pre-trade transparency and market quality

Cited by 73 publications

References 29 publications

The Impact of Stock Market Structure on Volatility: Evidence from a Call Auction Suspension

The Impact of Stock Market Structure on Volatility: Evidence from a Call Auction Suspension

The Relationship between Listing Requirements and Market Quality: An Examination Using NASDAQ’s Tiered Market Structure

Pre-Trade Transparency in Over-the-Counter Markets

Contact Info

Product

Resources

About