When do regulatory interventions work?

Nidhi Aggarwal (), Venkatesh Panchapagesan () and Susan Thomas
Additional contact information
Venkatesh Panchapagesan: Indian Institute of Management, Bangalore

Indira Gandhi Institute of Development Research, Mumbai Working Papers from Indira Gandhi Institute of Development Research, Mumbai, India

Abstract: Previous studies find mixed results about how a fee on high order-to-trade (OTR) ratios impacts market quality. Using a natural experiment where such a fee was introduced twice for different reasons, this paper finds evidence of impact only when the implementation matched the motive. We use a difference-in-difference regression, that exploits microstructure features, to find causal evidence of lower aggregate OTR and higher market quality when the fee was used to manage limited exchange infrastructure, but little to no change in the OTRs or market quality when it was used for a regulatory need to slow down high frequency trading.

Keywords: algorithmic trading; financial regulation; market efficiency; market liquidity; financial derivatives (search for similar items in EconPapers)
JEL-codes: G14 G18 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2019-04
New Economics Papers: this item is included in nep-mst and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.igidr.ac.in/pdf/publication/WP-2019-011.pdf (application/pdf)

Related works:
Working Paper: When do regulatory interventions work? (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ind:igiwpp:2019-011

Access Statistics for this paper

More papers in Indira Gandhi Institute of Development Research, Mumbai Working Papers from Indira Gandhi Institute of Development Research, Mumbai, India Contact information at EDIRC.
Bibliographic data for series maintained by Shamprasad M. Pujar ().