Determinants of liquidity and execution probability in exchange operated dark pool: Evidence from the Australian Securities Exchange

William Peng He and Andrew Lepone ()

Pacific-Basin Finance Journal, 2014, vol. 30, issue C, 1-16

Abstract: This study investigates the determinants of liquidity and execution probability in an exchange operated dark pool. We analyse a unique set of data collated from the Australian Securities Exchange (ASX) that allows the identification of trades and orders in its Centre Point dark pool. This study contributes to the understanding of factors that influence traders' preference to transact through an exchange operated dark pool and the execution probability of dark orders. We also examine the impact of Centre Point dark pool trading on market quality. The results show that the level of trading activity in the dark pool is higher for larger stocks with lower prices. Dark pool's share of total volume is higher when quoted spreads are wider, best depth is thicker, and when order imbalance, volatility and adverse selection are lower in the central limit order book. Execution probability of Centre Point orders increases when dark pool trading is most active and when average Centre Point order size is greater. We find no evidence of Centre Point trading being detrimental to market quality in our sample.

Keywords: Dark pool; Market microstructure; Centre Point; Execution probability; Market quality (search for similar items in EconPapers)
JEL-codes: G14 G15 G18 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:30:y:2014:i:c:p:1-16

DOI: 10.1016/j.pacfin.2014.07.004

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