Market quality and dark trading in the post MiFID II era: What have we learned so far?

Panagiotis Anagnostidis, George Papachristou and Christos Varsakelis

Economics Letters, 2019, vol. 184, issue C

Abstract: In this letter, we use the implementation of the Dark Volume Cap (DVC) Rule on 12∕03∕2018 for the suspension of European securities from dark trading as a natural laboratory to investigate the effect of dark pools on lit market price quality. We empirically demonstrate that the DVC rule has led to an increase of lit price volatility for suspended securities, while it has induced significant lit price inefficiencies for non-suspended securities. Our results suggest that the adverse effects of the DVC rule on lit market price quality are likely to be driven by the migration of a considerable fraction of small and uniformed traders from the dark to the lit market.

Keywords: Dark trading; MiFID II; Chi-X; Volatility; Price efficiency (search for similar items in EconPapers)
JEL-codes: G1 G2 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:184:y:2019:i:c:s0165176519303106

DOI: 10.1016/j.econlet.2019.108630

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