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Price Discovery and Trade Fragmentation in a Multi-Market Environment: Evidence from the MTS System

Guglielmo Maria Caporale and Alessandro Girardi

No 1139, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: This paper proposes new metrics for the process of price discovery on the main electronic trading platform for euro-denominated government securities. Analysing price data on daily transactions for 107 bonds over a period of twenty-seven months, we find a greater degree of price leadership of the dominant market when our measures (as opposed to the traditional price discovery metrics) are used. We also present unambiguous evidence that a market's contribution to price discovery is crucially affected by the level of trading activity. The implications of these empirical findings are discussed in the light of the debate about the possible restructuring of the regulatory framework for the Treasury bond market in Europe.

Keywords: Price discovery; liquidity; MTS system (search for similar items in EconPapers)
JEL-codes: C21 C32 G10 (search for similar items in EconPapers)
Pages: 41 p.
Date: 2011
New Economics Papers: this item is included in nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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https://www.diw.de/documents/publikationen/73/diw_01.c.376278.de/dp1139.pdf (application/pdf)

Related works:
Journal Article: Price discovery and trade fragmentation in a multi-market environment: Evidence from the MTS system (2013) Downloads
Working Paper: Price Discovery and Trade Fragmentation in a Multi-Market Environment: Evidence from the MTS System (2011) Downloads
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