Abstract

http://ssrn.com/abstract=1521494
 
 

References (96)



 
 

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A Glimpse into the Dark: Price Formation, Transaction Cost and Market Share of the Crossing Network


Mao Ye


University of Illinois at Urbana-Champaign

June 9, 2011


Abstract:     
This paper extends the Kyle (1985) framework to allow both endogenous price and endogenous execution probability. I use the model to examine the market outcome when the informed trader can split trades between an exchange and a crossing network (dark pool). The crossing network reduces price discovery and volatility. The impact is stronger for stocks with higher fundamental value uncertainty. An increase in the fundamental value uncertainty is found to increase the price impact in the exchange and non-execution probability in the crossing network, but creates a comparative advantage for the crossing network, as well as increasing its market share.

Number of Pages in PDF File: 59

Keywords: Crossing Network, Dark Pool, Price Discovery, Liquidity

JEL Classification: G10, G20

working papers series


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Date posted: January 10, 2010 ; Last revised: June 19, 2011

Suggested Citation

Ye, Mao, A Glimpse into the Dark: Price Formation, Transaction Cost and Market Share of the Crossing Network (June 9, 2011). Available at SSRN: http://ssrn.com/abstract=1521494 or http://dx.doi.org/10.2139/ssrn.1521494

Contact Information

Mao Ye (Contact Author)
University of Illinois at Urbana-Champaign ( email )
406 Wohlers
1206 South 6th Street
Champaign, IL 61820
United States
2172440474 (Phone)
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References:  96
Citations:  7

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