Abstract

http://ssrn.com/abstract=1960115
 
 

References (32)



 


 



Market Fragmentation and Information Quality: The Role of TRF Trades


Christine X. Jiang


University of Memphis - Fogelman College of Business and Economics

Thomas H. McInish


University of Memphis - Fogelman College of Business and Economics

James Upson


University of Texas at El Paso

March 26, 2012


Abstract:     
We analyze and compare the information quality of order flows on the exchange and on off-exchange venues reported to Trade Reporting Facilities. Compared to exchange order flow, we find that off-exchange order flow has significantly lower information quality, including a lower information ratio and a lower price impact, and a significantly higher percentage of trades executing inside the quote. Our results are consistent with the notion that the segmentation of uninformed liquidity traders in off-exchange venues so that there is a higher proportion of informed traders on the exchanges, leads to an improvement in price discovery and information quality on the exchanges. Use of off-exchange venues is higher with increased market speed and trading intensity, but decreases with higher intraday volatility.

Number of Pages in PDF File: 46

Keywords: Fragmentation, Market Quality, Off-exchange trading

JEL Classification: G14, G18, G19

working papers series


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Date posted: November 16, 2011 ; Last revised: February 10, 2014

Suggested Citation

Jiang, Christine X. and McInish, Thomas H. and Upson, James, Market Fragmentation and Information Quality: The Role of TRF Trades (March 26, 2012). Available at SSRN: http://ssrn.com/abstract=1960115 or http://dx.doi.org/10.2139/ssrn.1960115

Contact Information

Christine X. Jiang
University of Memphis - Fogelman College of Business and Economics ( email )
Memphis, TN 38152
United States
901-678¿5315 (Phone)
901-678¿2685 (Fax)
Thomas H. McInish
University of Memphis - Fogelman College of Business and Economics ( email )
Memphis, TN 38152
United States
901-678-4662 (Phone)
901-678-3006 (Fax)
James Upson (Contact Author)
University of Texas at El Paso ( email )
500 West University
El Paso, TX 79968-0545
United States
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