Regulating dark trading: Order flow segmentation and market quality

• 成果类型: Article
• 署名作者: Comerton-Forde, Carole; Malinova, Katya; Park, Andreas
• 署名单位: University of Toronto; University of Toronto; University Toronto Mississauga; University of Toronto
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2018.07.002
• 发表日期: 2018
• 页码: 347-366
• 关键词: Dark trading; Trade-at rule; Price improvement; segmentation; Retail internalization

摘要

We examine the impact of a rule in the Canadian equities market that requires dark orders to offer price improvement over displayed orders. We show that this rule eliminated intermediation of retail orders in the dark and shifted retail orders onto the lit market with the lowest trading fee. Intermediaries shifted liquidity supply to this market leading to increased displayed liquidity. We conclude that reducing retail order segmentation enhances lit liquidity. Despite the improvement in liquidity, retail traders receive less price improvement. Retail brokers pay higher trading fees to exchanges, and high-frequency traders earn higher revenues from trading fees. Crown Copyright (C) 2018 Published by Elsevier B.V. All rights reserved.