The Flash Crash: A Cautionary Tale About Highly Fragmented Markets

• 成果类型: Article
• 署名作者: Menkveld, Albert J.; Yueshen, Bart Zhou
• 署名单位: Tinbergen Institute; Vrije Universiteit Amsterdam; INSEAD Business School
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2018.3040
• 发表日期: 2019
• 页码: 4470-4488
• 关键词: flash crash; large seller; electronic market; broken arbitrage

摘要

A breakdown of cross-market arbitrage activity could make markets more fragile and result in price crashes. We provide suggestive evidence for this novel channel based on a high-frequency analysis of the most salient crash in recent history: The Flash Crash. We further show that such an event can be extremely costly for a large seller trading in a particular venue as the seller effectively relies on local liquidity supply only. These findings highlight the vulnerability of today's highly fragmented markets.