Articles and white papers on trade execution and stock exchanges. Amongst our most popular research in this section are white papers on high-frequency trading (HFT), covering for instance, "high-frequency trading and dark pools" and HFT from an asset manager's perspective. Reports on dark pools of liquidity is well featured, highlighting a need to understand dark pools in equity trading..., but also reflecting concerns over the impact of dark trading on market quality. Bond liquidity risk has been another recent investor concern, and research on bond market liquidity has been well received. Other popular research includes white papers on broker trade execution services, transition management, extreme price movements, the impact of a global withholding tax, and analysis of trading costs for pension funds. This category contains surveys and papers of interest to traders, dealers, market-makers, trading venues, stock exchanges and operators of dark pools and dealing platforms.
Liquidity risk grabbed headlines this summer on the heels of several high-profile fund implosions. The hunt is now on to find ways to manage market liquidity risk and to protect portfolios against liquidity crunches.
When an institutional investor adds a new asset class, rebalances, or hires or fires a manager, assets will need to be moved from one or more portfolios to other, potentially new, portfolios. These assets may stay within the same asset class (e.g., when one small cap stock manager is replaced with another) or they may move…
Using a novel within-dealer, within-security identification strategy, we examine intended and unintended effects of the Volcker rule on covered firms’ corporate bond trading using dealer-identified regulatory data.
As ICMA prepares to launch its first FinTech course in December, course tutor Gail Rolland talks to ICMA’s Gabriel Callsen about the main drivers for electronification of financial markets, the proliferation of solutions from incumbents and start-ups and how regulators are reacting to rapid changes. Gabriel explains what…
Latency (i.e., time delay) in electronic markets affects the efficacy of liquidity taking strategies. During the time liquidity takers process information and send marketable limit orders (MLOs) to the exchange, the limit order book (LOB) might undergo updates, so there is no guarantee that MLOs are filled. We develop a…
Flow toxicity can be measured in terms of the probability that a liquidity provider is adversely selected by informed traders. In previous papers we introduced the concept of Volume-synchronized Probability of Informed Trading (the VPIN* metric), and provided a robust estimation procedure. In this study, we discuss the…
Dealers, who strategically supply liquidity to traders, are subject to both liquidity and adverse selection costs. While liquidity costs can be mitigated through inter-dealer trading, individual dealers’ private motives to acquire information compromise inter-dealer market liquidity. Post-trade information disclosure can…
We study the impact that two trading rule changes in the interdealer spot foreign exchange market, a reduction in the "tick size'' and a subsequent increase, had on the trading behavior of various types of market participants. We find that the most notable impact of the tick size reduction was a substantial…
