Commonality in Liquidity and Multilateral Trading Facilities

42 Pages Posted: 2 Feb 2016 Last revised: 8 Jan 2020

See all articles by Pankaj K. Jain

Pankaj K. Jain

University of Memphis - Fogelman College of Business and Economics

Mohamed A. Mekhaimer

St. John Fisher College

Sandra Mortal

University of Alabama - Culverhouse College of Commerce & Business Administration

Date Written: December 20, 2019

Abstract

We use the introduction of two multilateral trading facilities (MTFs) to examine the impact of market fragmentation on commonality in liquidity. We find that the introduction of MTFs following the Markets in Financial Instruments Directive increases the comovement of stocks’ liquidity with MTF liquidity, while the comovement with the home market liquidity generally decreases. We also find that the higher the MTF trading volume or the number of MTFs trading a stock, the stronger the effect. Further, we find that the commonality in liquidity remains unchanged for a matched control sample of stocks that do not trade on MTFs.

Keywords: commonality in liquidity, multilateral trading facilities, market fragmentation, Turquoise, NYSE Arca Europe

JEL Classification: G11, G12, G14

Suggested Citation

Jain, Pankaj K. and Mekhaimer, Mohamed A. and Mortal, Sandra, Commonality in Liquidity and Multilateral Trading Facilities (December 20, 2019). Available at SSRN: https://ssrn.com/abstract=2725876

Pankaj K. Jain

University of Memphis - Fogelman College of Business and Economics ( email )

Memphis, TN 38152
United States

Mohamed A. Mekhaimer (Contact Author)

St. John Fisher College ( email )

3690 East Avenue
Rochester, NY 14618
United States

Sandra Mortal

University of Alabama - Culverhouse College of Commerce & Business Administration ( email )

Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States

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