Trading activity and price impact in parallel markets: SETS vs. off-book market at the London Stock Exchange

Risultato della ricerca: Book/Film/Article review

4 Citazioni (Scopus)

Abstract

We study empirically the trading activity in the electronic on-book segment and in thedealership off-book segment of the London Stock Exchange, investigating separately thetrading of active market members and of other market participants who are non-members.We find that (i) the volume distribution of off-book transactions has a significantly fatter tailthan that of on-book transactions, (ii) groups of members and non-members can be classified incategories according to their trading profile, (iii) there is a strong anticorrelation between thedaily inventory variation of a market member due to on-book market transactions and aninventory variation due to off-book market transactions with non-members, and (iv) theautocorrelation of the sign of the orders of non-members in the off-book market is slowlydecaying. We also analyse the on-book price impact function over time, both for positive andnegative lags, of the electronic trades and of the off-book trades. The unconditional impactcurves are very different for the electronic trades and the off-book trades. Moreover, there is asmall dependence of the impact on the volume for the on-book electronic trades, while the shapeand magnitude of the impact function of off-book transactions strongly depend on volume.
Lingua originaleEnglish
pagine (da-a)517-530
Numero di pagine14
RivistaDefault journal
Volume12
Stato di pubblicazionePublished - 2012

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London Stock Exchange
Trading activity
Price impact
Lag
Electronic books

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics, Econometrics and Finance(all)

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title = "Trading activity and price impact in parallel markets: SETS vs. off-book market at the London Stock Exchange",
abstract = "We study empirically the trading activity in the electronic on-book segment and in thedealership off-book segment of the London Stock Exchange, investigating separately thetrading of active market members and of other market participants who are non-members.We find that (i) the volume distribution of off-book transactions has a significantly fatter tailthan that of on-book transactions, (ii) groups of members and non-members can be classified incategories according to their trading profile, (iii) there is a strong anticorrelation between thedaily inventory variation of a market member due to on-book market transactions and aninventory variation due to off-book market transactions with non-members, and (iv) theautocorrelation of the sign of the orders of non-members in the off-book market is slowlydecaying. We also analyse the on-book price impact function over time, both for positive andnegative lags, of the electronic trades and of the off-book trades. The unconditional impactcurves are very different for the electronic trades and the off-book trades. Moreover, there is asmall dependence of the impact on the volume for the on-book electronic trades, while the shapeand magnitude of the impact function of off-book transactions strongly depend on volume.",
author = "Angelo Carollo and Gabriella Vaglica and Mantegna, {Rosario Nunzio} and Fabrizio Lillo",
year = "2012",
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T1 - Trading activity and price impact in parallel markets: SETS vs. off-book market at the London Stock Exchange

AU - Carollo, Angelo

AU - Vaglica, Gabriella

AU - Mantegna, Rosario Nunzio

AU - Lillo, Fabrizio

PY - 2012

Y1 - 2012

N2 - We study empirically the trading activity in the electronic on-book segment and in thedealership off-book segment of the London Stock Exchange, investigating separately thetrading of active market members and of other market participants who are non-members.We find that (i) the volume distribution of off-book transactions has a significantly fatter tailthan that of on-book transactions, (ii) groups of members and non-members can be classified incategories according to their trading profile, (iii) there is a strong anticorrelation between thedaily inventory variation of a market member due to on-book market transactions and aninventory variation due to off-book market transactions with non-members, and (iv) theautocorrelation of the sign of the orders of non-members in the off-book market is slowlydecaying. We also analyse the on-book price impact function over time, both for positive andnegative lags, of the electronic trades and of the off-book trades. The unconditional impactcurves are very different for the electronic trades and the off-book trades. Moreover, there is asmall dependence of the impact on the volume for the on-book electronic trades, while the shapeand magnitude of the impact function of off-book transactions strongly depend on volume.

AB - We study empirically the trading activity in the electronic on-book segment and in thedealership off-book segment of the London Stock Exchange, investigating separately thetrading of active market members and of other market participants who are non-members.We find that (i) the volume distribution of off-book transactions has a significantly fatter tailthan that of on-book transactions, (ii) groups of members and non-members can be classified incategories according to their trading profile, (iii) there is a strong anticorrelation between thedaily inventory variation of a market member due to on-book market transactions and aninventory variation due to off-book market transactions with non-members, and (iv) theautocorrelation of the sign of the orders of non-members in the off-book market is slowlydecaying. We also analyse the on-book price impact function over time, both for positive andnegative lags, of the electronic trades and of the off-book trades. The unconditional impactcurves are very different for the electronic trades and the off-book trades. Moreover, there is asmall dependence of the impact on the volume for the on-book electronic trades, while the shapeand magnitude of the impact function of off-book transactions strongly depend on volume.

UR - http://hdl.handle.net/10447/74716

M3 - Book/Film/Article review

VL - 12

SP - 517

EP - 530

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JF - Default journal

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