The Sensitivity of Trading to the Cost of Information

21 Pages Posted: 15 Mar 2019

See all articles by Alex Frino

Alex Frino

University of Wollongong

Ognjen Kovacevic

Macquarie University

Vito Mollica

Macquarie Graduate School of Management; Capital Markets CRC Limited (CMCRC); Macquarie University, Faculty of Business and Economics

Robert I. Webb

University of Virginia - McIntire School of Commerce

Date Written: February 25, 2019

Abstract

This study examines the impact of changes in the price of the data feeds on the efficiency of price discovery. To this end, we use three exogenous events arising from the staggered increase of price quotation fee on Chicago Mercantile Exchange to test the theoretical predictions of Cespa and Foucault (2014) who note that price discovery is “…determined by the fee charged by exchanges for price information”. After controlling for known determinants of price discovery, we observe a decrease in efficiency of price discovery following the increases in the price of the data, in line with the theory.

Note: This research was funded under Corporations regulation 7.5.88 through the use of excess funds from the SFEFF.

Suggested Citation

Frino, Alex and Kovacevic, Ognjen and Mollica, Vito and Webb, Robert I., The Sensitivity of Trading to the Cost of Information (February 25, 2019). Available at SSRN: https://ssrn.com/abstract=3341081

Alex Frino

University of Wollongong ( email )

Northfields Avenue
Wollongong, New South Wales 2522
Australia

Ognjen Kovacevic (Contact Author)

Macquarie University ( email )

North Ryde
Sydney, New South Wales 2109
Australia
416232607 (Phone)

Vito Mollica

Macquarie Graduate School of Management ( email )

Capital Markets CRC Limited (CMCRC) ( email )

Level 3, 55 Harrington Street
Sydney, 2000
Australia

Macquarie University, Faculty of Business and Economics ( email )

Australia

Robert I. Webb

University of Virginia - McIntire School of Commerce ( email )

Rouss and Robertson Halls 125 Ruppel Lane
Charlottesville, VA 22903
United States
(434) 924-7570 (Phone)

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