Island goes dark: Transparency, fragmentation, and regulation

• 成果类型: Article
• 署名作者: Hendershott, T; Jones, CM
• 署名单位: University of California System; University of California Berkeley; Columbia University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhi013
• 发表日期: 2005
• 页码: 743
• 关键词: Price discovery; DEALER MARKETS; COMPETITION; INFORMATION; liquidity; consolidation; equilibrium; components; disclosure; BEHAVIOR

摘要

Responding to a September 2002 regulatory enforcement, the Island electronic communications network stopped displaying its limit order book in the three most active exchange-traded funds (ETFs) where it was the dominant venue. Island's share of trading activity and price discovery fell, fragmenting the market. ETF prices adjust more slowly when Island goes dark, and there is substantial price discovery movement from ETFs to the futures market. Trading costs increase on Island and decrease off Island, with higher trading costs overall. When Island later redisplays its orders, market quality improves, with transparency and the reduction in fragmentation both playing important roles.