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Trading places: Price leadership and the competition for order flow

Gbenga Ibikunle

Journal of Empirical Finance, 2018, vol. 49, issue C, 178-200

Abstract: I investigate the role of price leadership and informed trading in the competition for order flow between high-tech entrant trading venues and established national trading venues. An analysis of BATS Chi-X Europe (Chi-X), a high-tech entrant, and London Stock Exchange (LSE), an established national exchange, suggests that Chi-X’s price leadership in the London market is critical to its acquisition of market share at LSE’s expense. Intraday variations in price leadership, driven by informed trading, liquidity constraints and institutional trading arrangements are, however inconsistent with the theoretical liquidity–efficiency link. Asymmetric effects of dark and algorithmic trading across the platforms are also reported.

Keywords: High-tech entrants; Price discovery; Multilateral trading facilities; Regulated markets; Dark trading; Algorithmic trading (search for similar items in EconPapers)
JEL-codes: G14 G15 G18 (search for similar items in EconPapers)
Date: 2018
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Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff

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