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Commonality in intraday liquidity and multilateral trading facilities: Evidence from Chi-X Europe

Olga Klein and Shiyun Song

Journal of International Financial Markets, Institutions and Money, 2021, vol. 73, issue C

Abstract: This paper examines the effects of Chi-X, a pan-European multilateral trading facility, on intraday liquidity co-movements within European equity markets. Chi-X enables simultaneous trading of all European equities on a single trading platform. Further, it induces an increase in multi-market trading between Chi-X and the home exchange, connecting individual markets in a single network. Greater market consolidation combined with an increase in multi-market trading should induce stronger network-wide liquidity co-movements. Consistent with our predictions, we find that Europe-wide liquidity co-movements increase after the Chi-X entry. The increase is stronger in down markets and for stocks with more intense trading on Chi-X.

Keywords: Market consolidation; Multi-market trading; High-frequency trading; Commonality in Liquidity; European equities; Liquidity risks (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:73:y:2021:i:c:s1042443121000688

DOI: 10.1016/j.intfin.2021.101349

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Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely

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