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The Impact of Large Orders in Electronic Markets

L. Bosetti, P. Gottardo, Maurizio Murgia () and Andrea Pinna

Working Paper CRENoS from Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia

Abstract: We examine both displayed and non-displayed orders sent by all investors to the electronic central limit order book of the Italian stock exchange Borsa Italiana (BI) in 2005, after stocks recovered from the dot-com burst and before the run-up to the financial crisis. Extant literature relies on trades as basic level of observation for the lack of data. Our unique dataset enables us to re- construct the evolution of the order book and trades over time. Trading costs are lower than in any other exchange analysed in the past. Rules on over-the-counter trading allow us to measure the economic impact of market fragmentation. Contrarily to the existing literature, we observe price impacts are lower in the electronic downstairs market than in the upstairs market. We explain our results in terms of exchange trading architecture.

Keywords: Large Orders; Electronic exchange; Upstairs market; Block trading; Price Impact; Liquidity; Dark Pool (search for similar items in EconPapers)
JEL-codes: G23 G14 G15 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-mst
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Downloads: (external link)
https://crenos.unica.it/crenos/node/6530
https://crenos.unica.it/crenos/sites/default/files/WP15-10.pdf (application/pdf)

Related works:
Journal Article: The impact of large orders in electronic markets (2019) Downloads
Working Paper: The Impact of Large Orders in Electronic Markets (2014) Downloads
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