Efficiency and the trading system: The case of SETSmm

Patricia Chelley-Steeley and Leonid Skvortsov

Journal of International Financial Markets, Institutions and Money, 2010, vol. 20, issue 5, 509-518

Abstract: This paper studies the impact that a change from a dealer system to a market-maker supported auction system has on market quality. We study the impact that the introduction of SETSmm at the London Stock Exchange had on firm value, price efficiency and liquidity. We discover a small SETSmm return premium associated with the announcement that securities are to migrate to the new trading system. Moreover, securities that migrate to SETSmm are characterized by improvements to liquidity and pricing efficiency. We find that these changes are related to the return premium.

Keywords: Microstructure; Pricing; inefficiency; Trading; system; Liquidity (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:20:y:2010:i:5:p:509-518

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