IDEAS home Printed from https://ideas.repec.org/p/zbw/kondp2/285.html
   My bibliography  Save this paper

Anonymous electronic trading versus floor trading

Author

Listed:
  • Franke, Günter
  • Hess, Dieter

Abstract

This paper compares the attractiveness of floor trading and anonymous electronic trading systems. It is argued that in times of low information intensity the insight into the order book of the electronic trading system provides more valuable information than floor trading, but in times of high information intensity the reverse is true. Thus, the electronic system's market share in trading activity should decline in times of high information intensity. This hypothesis is tested by data on BUND-Future trading. This future is traded on the German and on the British futures exchange. The empirical results support the hypothesis.

Suggested Citation

  • Franke, Günter & Hess, Dieter, 1995. "Anonymous electronic trading versus floor trading," Discussion Papers, Series II 285, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    • Handle: RePEc:zbw:kondp2:285
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/101791/1/726321052.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Lee, Charles M C & Ready, Mark J & Seguin, Paul J, 1994. "Volume, Volatility, and New York Stock Exchange Trading Halts," Journal of Finance, American Finance Association, vol. 49(1), pages 183-214, March.
    2. Pagano, Marco & Roell, Ailsa, 1992. "Auction and dealership markets : What is the difference?," European Economic Review, Elsevier, vol. 36(2-3), pages 613-623, April.
    3. Karpoff, Jonathan M., 1987. "The Relation between Price Changes and Trading Volume: A Survey," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(1), pages 109-126, March.
    4. Glosten, Lawrence R. & Milgrom, Paul R., 1985. "Bid, ask and transaction prices in a specialist market with heterogeneously informed traders," Journal of Financial Economics, Elsevier, vol. 14(1), pages 71-100, March.
    5. George, Thomas J & Kaul, Gautam & Nimalendran, M, 1994. "Trading Volume and Transaction Costs in Specialist Markets," Journal of Finance, American Finance Association, vol. 49(4), pages 1489-1505, September.
    6. Glosten, Lawrence R, 1994. "Is the Electronic Open Limit Order Book Inevitable?," Journal of Finance, American Finance Association, vol. 49(4), pages 1127-1161, September.
    7. Madhavan, Ananth, 1992. "Trading Mechanisms in Securities Markets," Journal of Finance, American Finance Association, vol. 47(2), pages 607-641, June.
    8. Marco Pagano, 1989. "Trading Volume and Asset Liquidity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(2), pages 255-274.
    9. Franses, P.H. & Van Ieperen, R. & Kofman, P. & Martens, M. & Menkveld, B., 1994. "Volatility Patterns and Spillovers in Bund Futures," Monash Econometrics and Business Statistics Working Papers 16/94, Monash University, Department of Econometrics and Business Statistics.
    10. Stephan, Jens A & Whaley, Robert E, 1990. "Intraday Price Change and Trading Volume Relations in the Stock and Stock Option Markets," Journal of Finance, American Finance Association, vol. 45(1), pages 191-220, March.
    11. repec:bla:jfinan:v:44:y:1989:i:1:p:115-34 is not listed on IDEAS
    12. George, Thomas J & Kaul, Gautam & Nimalendran, M, 1991. "Estimation of the Bid-Ask Spread and Its Components: A New Approach," The Review of Financial Studies, Society for Financial Studies, vol. 4(4), pages 623-656.
    13. Blume, Lawrence & Easley, David & O'Hara, Maureen, 1994. "Market Statistics and Technical Analysis: The Role of Volume," Journal of Finance, American Finance Association, vol. 49(1), pages 153-181, March.
    14. Amihud, Yakov & Mendelson, Haim, 1987. "Trading Mechanisms and Stock Returns: An Empirical Investigation," Journal of Finance, American Finance Association, vol. 42(3), pages 533-553, July.
    15. Benveniste, Lawrence M. & Marcus, Alan J. & Wilhelm, William J., 1992. "What's special about the specialist?," Journal of Financial Economics, Elsevier, vol. 32(1), pages 61-86, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Martens, Martin, 1998. "Price discovery in high and low volatility periods: open outcry versus electronic trading," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 8(3-4), pages 243-260, December.
    2. Franke, Gunter & Hess, Dieter, 2000. "Information diffusion in electronic and floor trading," Journal of Empirical Finance, Elsevier, vol. 7(5), pages 455-478, December.
    3. Battalio, Robert & Jennings, Robert & Selway, Jamie, 2001. "The potential for clientele pricing when making markets in financial securities," Journal of Financial Markets, Elsevier, vol. 4(1), pages 85-112, January.
    4. Dhillon, Upinder S. & Lasser, Dennis J. & Watanabe, Taiji, 1997. "Volatility, information, and double versus walrasian auction pricing in US and Japanese futures markets," Journal of Banking & Finance, Elsevier, vol. 21(7), pages 1045-1061, July.
    5. Kappi, Jari & Siivonen, Risto, 2000. "Market liquidity and depth on two different electronic trading systems: A comparison of Bund futures trading on the APT and DTB," Journal of Financial Markets, Elsevier, vol. 3(4), pages 389-402, November.
    6. Frino, Alex & McInish, Thomas H. & Toner, Martin, 1998. "The liquidity of automated exchanges: new evidence from German Bund futures," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 8(3-4), pages 225-241, December.
    7. Kaiser, Ulrich, 1997. "The determinants of BUND-future price changes: An ordered probit analysis using DTB and LIFFE data," ZEW Discussion Papers 97-09, ZEW - Leibniz Centre for European Economic Research.
    8. Francis Breedon & Allison Holland, 1998. "Electronic versus open outcry markets: The case of the Bund futures contract," Bank of England working papers 76, Bank of England.
    9. Oehler, Andreas & Unser, Matthias, 1998. "Market Transparency and Call Markets," Discussion Papers 6, University of Bamberg, Chair of Finance.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Franke, Gunter & Hess, Dieter, 2000. "Information diffusion in electronic and floor trading," Journal of Empirical Finance, Elsevier, vol. 7(5), pages 455-478, December.
    2. Biais, Bruno & Glosten, Larry & Spatt, Chester, 2005. "Market microstructure: A survey of microfoundations, empirical results, and policy implications," Journal of Financial Markets, Elsevier, vol. 8(2), pages 217-264, May.
    3. Goodhart, Charles A. E. & O'Hara, Maureen, 1997. "High frequency data in financial markets: Issues and applications," Journal of Empirical Finance, Elsevier, vol. 4(2-3), pages 73-114, June.
    4. Martens, Martin, 1998. "Price discovery in high and low volatility periods: open outcry versus electronic trading," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 8(3-4), pages 243-260, December.
    5. G. Wuyts, 2007. "Stock Market Liquidity.Determinants and Implications," Review of Business and Economic Literature, KU Leuven, Faculty of Economics and Business (FEB), Review of Business and Economic Literature, vol. 0(2), pages 279-316.
    6. Jagjeev Dosanjh, 2017. "Exchange Initiatives and Market Efficiency: Evidence from the Australian Securities Exchange," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 1-2017, January-A.
    7. repec:uts:finphd:34 is not listed on IDEAS
    8. Madhavan, Ananth, 2000. "Market microstructure: A survey," Journal of Financial Markets, Elsevier, vol. 3(3), pages 205-258, August.
    9. John Board & Charles Sutcliffe & Stephen Wells, 2002. "Transparency and Fragmentation," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-4039-0707-3, March.
    10. Kappi, Jari & Siivonen, Risto, 2000. "Market liquidity and depth on two different electronic trading systems: A comparison of Bund futures trading on the APT and DTB," Journal of Financial Markets, Elsevier, vol. 3(4), pages 389-402, November.
    11. Lee, Jie-Haun & Chou, Robin K., 2004. "The intraday stock return characteristics surrounding price limit hits," Journal of Multinational Financial Management, Elsevier, vol. 14(4-5), pages 485-501.
    12. Theissen, Erik, 2000. "Market structure, informational efficiency and liquidity: An experimental comparison of auction and dealer markets," Journal of Financial Markets, Elsevier, vol. 3(4), pages 333-363, November.
    13. Victoria Saporta, 1997. "Which Inter-dealer Market Prevails? An analysis of inter-dealer trading in opaque markets," Bank of England working papers 59, Bank of England.
    14. Joachim Grammig & Dirk Schiereck & Erik Theissen, 2000. "Informationsbasierter Aktienhandel über IBIS," Schmalenbach Journal of Business Research, Springer, vol. 52(7), pages 619-642, November.
    15. Roll, Richard & Schwartz, Eduardo & Subrahmanyam, Avanidhar, 2014. "Trading activity in the equity market and its contingent claims: An empirical investigation," Journal of Empirical Finance, Elsevier, vol. 28(C), pages 13-35.
    16. Nimalendran, M. & Petrella, Giovanni, 2003. "Do 'thinly-traded' stocks benefit from specialist intervention?," Journal of Banking & Finance, Elsevier, vol. 27(9), pages 1823-1854, September.
    17. Pierre-Cyrille Hautcoeur & Amir Rezaee & Angelo Riva, 2023. "Competition between securities markets: stock exchange industry regulation in the Paris financial center at the turn of the twentieth century," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 17(2), pages 261-299, May.
    18. Weiyu Kuo & Yu‐Ching Li, 2011. "Trading Mechanisms and Market Quality: Call Markets versus Continuous Auction Markets," International Review of Finance, International Review of Finance Ltd., vol. 11(4), pages 417-444, December.
    19. Li Jiang & Lawrence Kryzanowski, 1997. "Trading Activity, Quoted Liquidity, and Stock Volatility," Multinational Finance Journal, Multinational Finance Journal, vol. 1(3), pages 199-227, September.
    20. Hatheway, Frank & Kwan, Amy & Zheng, Hui, 2017. "An Empirical Analysis of Market Segmentation on U.S. Equity Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 52(6), pages 2399-2427, December.
    21. Coppejans, Mark & Domowitz, Ian, 1999. "Pricing behavior in an off-hours computerized market," Journal of Empirical Finance, Elsevier, vol. 6(5), pages 583-607, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:kondp2:285. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/fwkonde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.