Informational linkages between dark and lit trading venues

Mahendrarajah Nimalendran and Sugata Ray

Journal of Financial Markets, 2014, vol. 17, issue C, 230-261

Abstract: We examine the linkages between dark and lit venues using a proprietary data set. We find that algorithmic trades for less liquid stocks are correlated with higher spreads and price impact, as well as contemporaneous trading on the lit venues. Also, signed trades for these stocks predict future returns over the next 15–120 minutes. Trades for liquid stocks, trades by the dark venue brokerage desk, and trades of large blocks transmit less information to lit venues. The results suggest informed agents split orders using algorithms across dark and lit trading venues, with lit orders providing some price discovery.

Keywords: Crossing networks; Algorithmic trading; Price discovery; Information transmission (search for similar items in EconPapers)
JEL-codes: D53 G12 G28 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (44)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:17:y:2014:i:c:p:230-261

DOI: 10.1016/j.finmar.2013.02.003

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