COVID-19 and market structure dynamics

Justin Cox and Donovan Woods

Journal of Banking & Finance, 2023, vol. 147, issue C

Abstract: We examine the impact of COVID-19 on market structure in the U.S. Specifically, we analyze the impact of both the COVID-19-induced market uncertainty period as well as the suspension of the NYSE floor on trading dynamics such as market fragmentation, algorithmic trading, and hidden liquidity in the market. During both the heightened market uncertainty and NYSE floor suspension periods, we find a significant increase in hidden liquidity yet significant decreases in both algorithmic trading and market fragmentation. However, despite withdrawing from the market during this period, remaining algorithmic traders appear to improve market quality. Our results indicate that COVID-19 had a significant impact on order routing, pre-trade transparency, and automated trading.

Keywords: COVID-19 pandemic; NYSE floor close; Algorithmic trading; Hidden liquidity (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 G18 L1 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:147:y:2023:i:c:s0378426621003137

DOI: 10.1016/j.jbankfin.2021.106362

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