Lifting the Veil: An Analysis of Pre-Trade Transparency at the NYSE

Leonard N. Stern School of Business Dept. of Finance Working Paper No. 03-002

45 Pages Posted: 9 Apr 2003

See all articles by Ekkehart Boehmer

Ekkehart Boehmer

Singapore Management University - Lee Kong Chian School of Business

Gideon Saar

Cornell University - Samuel Curtis Johnson Graduate School of Management

Lei Yu

University of Notre Dame

Multiple version iconThere are 3 versions of this paper

Date Written: April 2004

Abstract

We study pre-trade transparency by looking at the introduction of NYSE's OpenBook service that provides limit order book information to traders off the exchange floor. We find that traders attempt to manage limit order exposure: They submit smaller orders and cancel orders faster. Specialists' participation rate and the depth they add to the quote decline. Liquidity increases in that the price impact of orders declines, and we find some improvement in the informational efficiency of prices. These results suggest that an increase in pre-trade transparency affects investors' trading strategies and can improve certain dimensions of market quality.

Keywords: Market microstructure, informational efficiency, liquidity, market design, New York Stock Exchange, OpenBook, transparency, trading strategies, limit orders, specialists

JEL Classification: G24

Suggested Citation

Boehmer, Ekkehart and Saar, Gideon and Yu, Lei, Lifting the Veil: An Analysis of Pre-Trade Transparency at the NYSE (April 2004). Leonard N. Stern School of Business Dept. of Finance Working Paper No. 03-002, Available at SSRN: https://ssrn.com/abstract=368102 or http://dx.doi.org/10.2139/ssrn.368102

Ekkehart Boehmer (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

Singapore

Gideon Saar

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

431 Sage Hall
Ithaca, NY 14853
United States
607-255-7484 (Phone)
607-255-5993 (Fax)

HOME PAGE: https://www.johnson.cornell.edu/Faculty-And-Research/Profile?id=gs25

Lei Yu

University of Notre Dame ( email )

256 Mendoza College of Business
Notre Dame, IN 46556
United States
574-631-9935 (Phone)
574-631-5255 (Fax)

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