Arbeitspapier
The effect of fragmentation in trading on market quality in the UK equity market
We investigate the effects of fragmentation in equity trading on the quality of the trading outcomes, specifically volatility, liquidity and volume. We use panel regression methods on a weekly dataset following the FTSE350 stocks over the period 2008-2011, which provides a lot of cross-sectional and time series variation in fragmentation. This period coincided with a great deal of turbulence in the UK equity markets which had multiple causes that need to be controlled for. To achieve this, we use a version of the common correlated effects estimator (Pesaran, 2006). One finding is that volatility is lower in a fragmented market when compared to a monopoly. Trading volume at the London Stock Exchange is lower too, but global trading volume is higher if order flow is fragmented across multiple venues. When separating overall fragmentation into visible fragmentation and dark reading, we find that the decline in LSE volume can be attributed to visible fragmentation, while the increase in global volume is due to dark trading.
- Language
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Englisch
- Bibliographic citation
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Series: cemmap working paper ; No. CWP42/13
- Classification
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Wirtschaft
Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models
Financial Institutions and Services: Government Policy and Regulation
Market Structure, Firm Strategy, and Market Performance: General
- Subject
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Heterogenous panel data
quantile regression
MiFID
- Event
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Geistige Schöpfung
- (who)
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Körber, Lena
Linton, Oliver
Vogt, Michael
- Event
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Veröffentlichung
- (who)
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Centre for Microdata Methods and Practice (cemmap)
- (where)
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London
- (when)
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2013
- DOI
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doi:10.1920/wp.cem.2013.4213
- Handle
- Last update
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10.03.2025, 11:45 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Körber, Lena
- Linton, Oliver
- Vogt, Michael
- Centre for Microdata Methods and Practice (cemmap)
Time of origin
- 2013