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From upstairs to downstairs trading: Evidence from a highly segmented market

Author

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  • Białkowski, Jędrzej
  • Hong, Sanghyun
  • Wagner, Moritz

Abstract

Using data on more than 18 million trades, this paper examines the information content of trades in a highly segmented market that until recently had no restrictions on trading outside the central limit order book (LOB). Consistent with theoretical predictions and earlier findings, we largely confirm that the permanent price effect is significantly lower in the upstairs market than downstairs. Furthermore, we find that a newly implemented minimum size requirement for trades in the upstairs market works as intended by the market provider. However, trades that are exempt from this requirement and small, informed institutional trades carry more information content in the upstairs market.

Suggested Citation

  • Białkowski, Jędrzej & Hong, Sanghyun & Wagner, Moritz, 2022. "From upstairs to downstairs trading: Evidence from a highly segmented market," Finance Research Letters, Elsevier, vol. 46(PB).
    • Handle: RePEc:eee:finlet:v:46:y:2022:i:pb:s1544612321004839
    DOI: 10.1016/j.frl.2021.102518
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    References listed on IDEAS

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    More about this item

    Keywords

    Upstairs market; Price effect; Information effect; Limit order book (LOB);
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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