The Impact of Large Orders in Electronic Markets

International Review of Economics and Finance, 2018, Forthcoming

54 Pages Posted: 27 Oct 2018

See all articles by Maurizio Murgia

Maurizio Murgia

Free University of Bolzano-Bozen Faculty of Economics and Management

Andrea Pinna

Free University of Bolzano-Bozen Faculty of Economics and Management

Pietro Gottardo

University of Pavia - Department of Business Research

Luisella Bosetti

Borsa Italiana S.p.A.

Multiple version iconThere are 2 versions of this paper

Date Written: September 5, 2018

Abstract

We examine both displayed and non-displayed orders sent by all investors to the electronic central limit order book of the Italian stock exchange Borsa Italiana (BI). Extant literature relies on trades as basic level of observation for the lack of data. Our unique dataset enables us to reconstruct the evolution of the order book and trades over time. Trading costs are lower than in any other exchange analysed in the past. Rules on over-the-counter trading allow us to measure the economic impact of market fragmentation. Contrarily to the existing literature, we observe price impacts are lower in the electronic downstairs market than in the upstairs market. Our results suggest the exchange trading architecture more likely explain the higher trading efficiency in the electronic downstairs market, which then provide the ground to a more liquid and efficient market.

Keywords: Large Orders, Electronic exchange, Upstairs market, Dark Pool, Anonymous trading, Block trading, Block crossing rues, Price Impact, Liquidity, Market efficiency

JEL Classification: G12, G14, G15, G23

Suggested Citation

Murgia, Maurizio and Pinna, Andrea and Gottardo, Pietro and Bosetti, Luisella, The Impact of Large Orders in Electronic Markets (September 5, 2018). International Review of Economics and Finance, 2018, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3257915

Maurizio Murgia (Contact Author)

Free University of Bolzano-Bozen Faculty of Economics and Management ( email )

Piazza Universita' 1
Bolzano-Bozen, Bolzano 39100
Italy
+390471013110 (Phone)
+390471013009 (Fax)

HOME PAGE: http://www.unibz.it/academicstaff/mmurgia

Andrea Pinna

Free University of Bolzano-Bozen Faculty of Economics and Management ( email )

Piazza Universita' 1
Bolzano-Bozen, Bolzano 39100
Italy
+390471013297 (Phone)
+390471013009 (Fax)

Pietro Gottardo

University of Pavia - Department of Business Research ( email )

Italy

Luisella Bosetti

Borsa Italiana S.p.A. ( email )

Italy

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