Commonality in Intraday Liquidity and Multilateral Trading Facilities: Evidence from Chi-X Europe

55 Pages Posted: 13 Jun 2017 Last revised: 5 May 2021

See all articles by Olga Klein

Olga Klein

University of Warwick - Warwick Business School; Gillmore Center for Financial Technology

Shiyun Song

The Vanguard Group, Inc.

Date Written: April 14, 2021

Abstract

This paper examines the effects of Chi-X, a pan-European multilateral trading facility, on intraday liquidity co-movements within European equity markets. Chi-X enables simultaneous trading of all European equities on a single trading platform. Further, it induces an increase in multi-market trading between Chi-X and the home exchange, connecting individual markets in a single network. Greater market consolidation combined with an increase in multi-market trading should induce stronger network-wide liquidity co-movements. Consistent with our predictions, we find that Europe-wide liquidity co-movements increase after the Chi-X entry. The increase is stronger in down markets and for stocks with more intense trading on Chi-X.

Keywords: Market consolidation, Multi-market trading, High-frequency trading, Commonality in Liquidity, European equities, Liquidity risks

JEL Classification: G10, G11, G12

Suggested Citation

Klein, Olga and Song, Shiyun, Commonality in Intraday Liquidity and Multilateral Trading Facilities: Evidence from Chi-X Europe (April 14, 2021). Journal of International Financial Markets, Institutions and Money, Forthcoming, WBS Finance Group Research Paper, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2984887 or http://dx.doi.org/10.2139/ssrn.2984887

Olga Klein (Contact Author)

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

Gillmore Center for Financial Technology ( email )

Warwick Business School
University of Warwick
Coventry, CV4 7AL
United Kingdom

Shiyun Song

The Vanguard Group, Inc. ( email )

100 Vanguard Blvd
Malvern, PA 19355
United States

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