Designated Market Makers in Electronic Limit Order Books - A Closer Look

40 Pages Posted: 2 Oct 2012 Last revised: 21 Jan 2013

See all articles by Erik Theissen

Erik Theissen

University of Mannheim - Finance Area

Christian Voigt

Fidessa Group, Paris

Christian Westheide

University of Vienna - Department of Finance; Goethe University Frankfurt - Research Center SAFE

Date Written: September 30, 2012

Abstract

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

Theissen, Erik and Voigt, Christian and Westheide, Christian, Designated Market Makers in Electronic Limit Order Books - A Closer Look (September 30, 2012). Midwest Finance Association 2013 Annual Meeting Paper. Available at SSRN: https://ssrn.com/abstract=2154699 or http://dx.doi.org/10.2139/ssrn.2154699

Erik Theissen

University of Mannheim - Finance Area ( email )

Mannheim, 68131
Germany

Christian Voigt

Fidessa Group, Paris ( email )

40 Rue La Boetie
Paris, 75008
France

Christian Westheide (Contact Author)

University of Vienna - Department of Finance ( email )

Bruennerstrasse 72
Vienna, 1210
Austria

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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