Dark trading and financial markets stability

Arbeitspapier

This paper examines how the implementation of a new dark order - Midpoint Extended Life Order on NASDAQ - impacts financial markets stability in terms of occurrences of mini-flash crashes in individual securities. We use high-frequency order book data and apply panel regression analysis to estimate the effect of M-ELO trading on market stability and liquidity provision. The results suggest a predominance of a speed bump effect of M-ELO rather than a darkness effect. We find that the introduction of M-ELO increases market stability by reducing the average number of mini-flash crashes, but its impact on market quality is mixed.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CFS Working Paper Series ; No. 691

Classification and Topics

• Classification: Wirtschaft ; General Financial Markets: General (includes Measurement and Data) ; Information and Market Efficiency; Event Studies; Insider Trading
• Subject: Market microstructure ; financial market stability ; mini-flash crash ; dark trading ; speed bump ; investor protection

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gonçalves, Jorge ; Kräussl, Roman ; Levin, Vladimir
• Event: Veröffentlichung
• (who): Goethe University Frankfurt, Center for Financial Studies (CFS)
• (where): Frankfurt a. M.
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/268893
• URN: urn:nbn:de:hebis:30:3-681471
• Last update: 10.03.2025, 11:42 AM CET