The Impact of Large Orders in Electronic Markets

P. Gottardo, Maurizio Murgia, Andrea Pinna and L. Bosetti

Working Paper CRENoS from Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia

Abstract: We examine both displayed and non-displayed orders sent by all investors to the electronic central limit order book of the Italian stock exchange Borsa Italiana (BI) in 2005, after stocks recovered from the dot-com burst and before the run-up to the financial crisis. Extant literature relies on trades as basic level of observation for the lack of data. Our unique dataset enables us to re- construct the evolution of the order book and trades over time. Trading costs are lower than in any other exchange analysed in the past. Rules on over-the-counter trading allow us to measure the economic impact of market fragmentation. Contrarily to the existing literature, we observe price impacts are lower in the electronic downstairs market than in the upstairs market. We explain our results in terms of exchange trading architecture.

Keywords: Upstairs market; Price Impact; Liquidity; Large Orders; Electronic exchange; Dark Pool; Block trading (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-mst
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https://crenos.unica.it/crenos/sites/default/files/WP15-10.pdf (application/pdf)

Related works:
Journal Article: The impact of large orders in electronic markets (2019)
Working Paper: The Impact of Large Orders in Electronic Markets (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:cns:cnscwp:201510

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