When a halt is not a halt: An analysis of off-NYSE trading during NYSE market closures
AbstractThough trading halts are a common feature in securities markets, the issues associated with the coordination of these halts across markets are not well understood. In fact, regulations often allow traders to circumvent trading halts through the use of alternative venues. Using a sample of order imbalance delayed openings on the NYSE, we examine the costs and benefits of continued trading on alternative venues when the main market calls a halt. We find that trades routed to off-NYSE venues during NYSE halts are associated with significant price discovery and lead to an improved post-halt trading environment. In addition, limit orders routed through ECNs reflect price-relevant information even prior to the halt, with limit book imbalances decreasing and depth filling in during the halt around the eventual reopening NYSE price. However, these informational benefits come at a substantial cost, as both execution costs and volatility are extremely high on off-NYSE venues during NYSE halts.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Financial Intermediation.
Volume (Year): 20 (2011)
Issue (Month): 3 (July)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/622875
Trading halt Price discovery Off-NYSE trading ECN Flash crash;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Madhavan, Ananth & Panchapagesan, Venkatesh, 2000. "Price Discovery in Auction Markets: A Look Inside the Black Box," Review of Financial Studies, Society for Financial Studies, vol. 13(3), pages 627-58.
- Barclay, Michael J. & Warner, Jerold B., 1993. "Stealth trading and volatility : Which trades move prices?," Journal of Financial Economics, Elsevier, vol. 34(3), pages 281-305, December.
- Bessembinder, Hendrik & Panayides, Marios & Venkataraman, Kumar, 2009. "Hidden liquidity: An analysis of order exposure strategies in electronic stock markets," Journal of Financial Economics, Elsevier, vol. 94(3), pages 361-383, December.
- Bessembinder, Hendrik & Kaufman, Herbert M., 1997. "A cross-exchange comparison of execution costs and information flow for NYSE-listed stocks," Journal of Financial Economics, Elsevier, vol. 46(3), pages 293-319, December.
- Rudy De Winne & Catherine D'hondt, 2007. "Hide-and-Seek in the Market: Placing and Detecting Hidden Orders," Review of Finance, European Finance Association, vol. 11(4), pages 663-692.
- 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.
- Charles Cao & Eric Ghysels & Frank Hatheway, 2000. "Price Discovery without Trading: Evidence from the Nasdaq Preopening," Journal of Finance, American Finance Association, vol. 55(3), pages 1339-1365, 06.
- Roger D. Huang, 2002. "The Quality of ECN and Nasdaq Market Maker Quotes," Journal of Finance, American Finance Association, vol. 57(3), pages 1285-1319, 06.
- Shane A. Corwin & Marc L. Lipson, 2000. "Order Flow and Liquidity around NYSE Trading Halts," Journal of Finance, American Finance Association, vol. 55(4), pages 1771-1805, 08.
- Michael J. Barclay, 2003. "Price Discovery and Trading After Hours," Review of Financial Studies, Society for Financial Studies, vol. 16(4), pages 1041-1073.
- Andrew Ellul & Hyun Song Shin & Ian Tonks, 2004.
"Opening and closing the market: evidence from the London Stock Exchange,"
LSE Research Online Documents on Economics
24753, London School of Economics and Political Science, LSE Library.
- Ellul, Andrew & Shin, Hyun Song & Tonks, Ian, 2005. "Opening and Closing the Market: Evidence from the London Stock Exchange," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 40(04), pages 779-801, December.
- Hyun Song Shin & Ian Tonks & Andrew Ellul, 2004. "Opening and Closing the Market: Evidence from the London Stock Exchange," FMG Discussion Papers dp506, Financial Markets Group.
- Hasbrouck, Joel & Saar, Gideon, 2009. "Technology and liquidity provision: The blurring of traditional definitions," Journal of Financial Markets, Elsevier, vol. 12(2), pages 143-172, May.
- Greenwald, Bruce C. & Stein, Jeremy C., 1991.
"Transactional Risk, Market Crashes, and the Role of Circuit Breakers,"
3710666, Harvard University Department of Economics.
- Greenwald, Bruce C & Stein, Jeremy C, 1991. "Transactional Risk, Market Crashes, and the Role of Circuit Breakers," The Journal of Business, University of Chicago Press, vol. 64(4), pages 443-62, October.
- Bidisha Chakrabarty & Kenneth W. Shaw, 2008. "Hidden Liquidity: Order Exposure Strategies Around Earnings Announcements," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 35(9-10), pages 1220-1244.
- Lee, Charles M C & Ready, Mark J, 1991. " Inferring Trade Direction from Intraday Data," Journal of Finance, American Finance Association, vol. 46(2), pages 733-46, June.
- Bruno Biais & Pierre Hillion & Chester Spatt, 1999. "Price Discovery and Learning during the Preopening Period in the Paris Bourse," Journal of Political Economy, University of Chicago Press, vol. 107(6), pages 1218-1248, December.
- Fama, Eugene F. & French, Kenneth R., 1997. "Industry costs of equity," Journal of Financial Economics, Elsevier, vol. 43(2), pages 153-193, February.
- Barclay, Michael J. & Hendershott, Terrence, 2008. "A comparison of trading and non-trading mechanisms for price discovery," Journal of Empirical Finance, Elsevier, vol. 15(5), pages 839-849, December.
- William G. Christie & Shane A. Corwin & Jeffrey H. Harris, 2002. "Nasdaq Trading Halts: The Impact of Market Mechanisms on Prices, Trading Activity, and Execution Costs," Journal of Finance, American Finance Association, vol. 57(3), pages 1443-1478, 06.
- Greenwald, Bruce C & Stein, Jeremy, 1988. "The Task Force Report: The Reasoning behind the Recommendations," Journal of Economic Perspectives, American Economic Association, vol. 2(3), pages 3-23, Summer.
- Xu, Hai-Chuan & Zhang, Wei & Liu, Yi-Fang, 2014. "Short-term market reaction after trading halts in Chinese stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 401(C), pages 103-111.
- Jos, van Bommel, 2011. "Measuring price discovery: The variance ratio, the R2, and the weighted price contribution," Finance Research Letters, Elsevier, vol. 8(3), pages 112-119, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.