Designated Market Makers in Electronic Limit Order Books - A Closer Look
40 Pages Posted: 2 Oct 2012 Last revised: 21 Jan 2013
Date Written: September 30, 2012
This paper takes a detailed look on the activities of designated market makers in the electronic limit order book Xetra of Deutsche Börse in order to enhance our understanding of the empirical finding of prior literature that designated market makers increase liquidity and firm values. We find designated market makers' liquidity provision is exploited at times of high information asymmetry, as measured through market based measures. Market makers' role in call auctions, particularly those after trading halts due to excessive volatility, is larger than that during continuous trading and their activities tend to stabilize prices.
Keywords: designated market makers, electronic limit order book
JEL Classification: G10, G14
Suggested Citation: Suggested Citation