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Splitting Orders in Overlapping Markets: A Study of Cross-Listed Stocks

45 Pages Posted: 22 Feb 2002 Last revised: 14 Jun 2008

Albert J. Menkveld

VU University Amsterdam; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)


Fragmented trading is widespread. Chowdhry and Nanda (1991) show that some traders benefit by splitting orders across markets at the cost of small liquidity traders who, for exogenous reasons, only trade locally. We extend their model to analyze British and Dutch ADRs, which in addition to a one or two hour overlap of NYSE and home market trading also feature a nonoverlap. We predict that, in the presence of sufficient small liquidity trading, traders concentrate their trades in the overlap and split orders. We document considerable empirical support. In the cross-section, we find evidence of order-splitting only for ADRs that exhibit most NYSE small liquidity trading. This evidence is (i) increased volatility, increased volume, and (weakly) higher liquidity supply in the overlap and (ii) positive correlation in order imbalance across markets. We further document an average 10% Hasbrouck information share for the common component in order imbalance.

Keywords: cross-listing, trading, fragmentation, high-frequency, nyse, order-splitting, multi-market trading, fragmented

JEL Classification: G15, G10, G18

Suggested Citation

Menkveld, Albert J., Splitting Orders in Overlapping Markets: A Study of Cross-Listed Stocks. Journal of Financial Intermediation, Vol. 17, 2008. Available at SSRN: or

Albert J. Menkveld (Contact Author)

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, 1081HV
+31 20 5986130 (Phone)
+31 20 5986020 (Fax)

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS

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