Leveling the trading field

David Easley, Terrence Hendershott and Tarun Ramadorai

Journal of Financial Markets, 2014, vol. 17, issue C, 65-93

Abstract: We examine the impact on stock prices of a major upgrade to the New York Stock Exchange's trading environment. The upgrade improved information dissemination on the trading floor and reduced the latency in reporting trades and quotes. The portion of the upgrade that reduced latency for electronic orders had significant impacts on liquidity, turnover, and returns. A portfolio that is long stocks undergoing the upgrade in the first 20 days of the upgrade and short stocks receiving the upgrade later has a return of roughly 3% over the period. The abnormal return was a priced effect of the improved liquidity produced by the upgrade.

Keywords: Market structure; Stock exchange; Trading volume; Transparency; Information; Latency; Technology upgrade (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:17:y:2014:i:c:p:65-93

DOI: 10.1016/j.finmar.2013.06.003

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