Effects of Lit and Dark Trading Venue Competition on Liquidity : The MiFID Experience
Gresse, Carole (2013-06), Effects of Lit and Dark Trading Venue Competition on Liquidity : The MiFID Experience, 2013 FMA European Conference, 2013-06, Luxembourg, Luxembourg
TypeCommunication / Conférence
Conference title2013 FMA European Conference
MetadataShow full item record
Dauphine Recherches en Management [DRM]
Abstract (EN)Based on trade and quote data from eight exchanges and a trade reporting facility for a sample of LSE- and Euronext-listed equities, this article compares the consolidated liquidity of competing markets, also called global liquidity, and the local liquidity of the primary exchang, before and after MiFID. It then investigates how liquidity measured by spreads and best-quote depth relate to market fragmentation and internalization after MiFID. Market fragmentation is found to improve global and local liquidity, with spreads decreasing proportionally to market competition. The decline in depth observed in the early post-MiFID period is driven by other factors than market fragmentation. The only harmful effect is that fragmentation may reduce market depth for small stocks. Further, internalization is not found to be detrimental for liquidity.
Subjects / KeywordsFragmentation; Liquidity; Multilateral Trading Facility; MTF; OTC trading; Internalization; Dark trading
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