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Order revelation at market openings

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  • Chakraborty, Archishman
  • Pagano, Michael S.
  • Schwartz, Robert A.
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    Abstract

    Order revelation is a non-trivial process that depends on a market's rules of order handling and order information disclosure. As participants reveal their orders for a stock to a market, the book gets deeper, price is discovered, and trading volume (quantity) is “found.” However, for large participants, uncertainty about the profile of other traders in the market inhibits their order revelation, thereby distorting trading volume and reducing the gains from trade. These inefficiencies are mitigated when participants can place multiple orders, and when submitted orders are displayed in an open book that effectively permits participants to engage in non-binding pre-trade communication.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Markets.

    Volume (Year): 15 (2012)
    Issue (Month): 2 ()
    Pages: 127-150

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    Handle: RePEc:eee:finmar:v:15:y:2012:i:2:p:127-150

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    Web page: http://www.elsevier.com/locate/finmar

    Related research

    Keywords: Order revelation; Quantity revelation; Bookbuilding; Call auctions; Market microstructure; Transparency;

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    References

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    Cited by:
    1. Pagano, Michael S. & Peng, Lin & Schwartz, Robert A., 2013. "A call auction's impact on price formation and order routing: Evidence from the NASDAQ stock market," Journal of Financial Markets, Elsevier, vol. 16(2), pages 331-361.
    2. Laurence Lescourret, 2012. "Non-fundamental Information and Market-makers' Behavior during the NASDAQ Preopening Session," Post-Print hal-00772798, HAL.

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