Not Available for Download

Liquidity, Activity, and Dependence on Interlinked Trading Venues

Lit and Dark Liquidity with Lost Time Data: Interlinked Trading Venues around the Global Financial Crisis (Palgrave Macmillan, 2014)

Posted: 2 Nov 2011 Last revised: 29 Mar 2014

Tommi A. Vuorenmaa

Triangle Intelligence

Date Written: January 1, 2012

Abstract

We study if liquidity on the major U.S. trading venues show significant differences before and during the financial crisis of 2008. The focus is put on liquidity because of a growing concern about liquidity fragmentation and because liquidity has been in the crux of many of the financial crises of the last two decades. We relate liquidity (both lit and dark) to jump activity, market microstructure noise variance, and average pairwise correlation to uncover differences between the most actively traded stocks on the NYSE, Arca, Nasdaq, and its reporting facility NASD ADF/TRF. The results depend partly on how high-frequency data are handled. In particular, they depend on what clock is used, for which purpose we develop the concept of lost time. Many of the found differences can be addressed to the increased use of algorithmic trading and regulatory changes that have been inflating trading volumes. A large chunk of these data are dark pool or, more generally, "off-exchange" trades reported to ADF/TRF, and they turn out to have some different dynamics from the trades of the three main trading venues in 2008 in the US.

Keywords: ADF/TRF, dark pools, fragmentation, liquidity

JEL Classification: C22, G15

Suggested Citation

Vuorenmaa, Tommi A., Liquidity, Activity, and Dependence on Interlinked Trading Venues (January 1, 2012). Lit and Dark Liquidity with Lost Time Data: Interlinked Trading Venues around the Global Financial Crisis (Palgrave Macmillan, 2014). Available at SSRN: https://ssrn.com/abstract=1952489 or http://dx.doi.org/10.2139/ssrn.1952489

Tommi A. Vuorenmaa (Contact Author)

Triangle Intelligence ( email )

Helsinki
Finland
+358-40-7757766 (Phone)

HOME PAGE: http://tommiavuorenmaa.net/

Paper statistics

Abstract Views
864