Effects of lit and dark market fragmentation on liquidity
Journal of Financial Markets, 2017, vol. 35, issue C, 1-20
Based on data from eight stock exchanges and a trade reporting facility for London Stock Exchange- and Euronext-listed equities, I investigate how lit and dark market fragmentation affects liquidity. Neither dark trading nor fragmentation between lit order books is found to harm liquidity. Lit fragmentation improves spreads and depth across markets and locally on the primary exchange, or at worst does not affect them. Benefits are greater for large stocks and stocks with less electronic trading. Lit fragmentation however harms the depth of small stocks. The adverse effects on the depth of large stocks result from algorithmic trading, not fragmentation.
Keywords: Fragmentation; Liquidity; Multilateral Trading Facility (MTF); OTC trading; Internalization; Dark trading; Algorithmic trading (search for similar items in EconPapers)
JEL-codes: G14 G15 G18 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:35:y:2017:i:c:p:1-20
Access Statistics for this article
Journal of Financial Markets is currently edited by B. Lehmann, D. Seppi and A. Subrahmanyam
More articles in Journal of Financial Markets from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().