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Sunshine trading: Flashes of trading intent at the NASDAQ

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  • Johannes A. Skjeltorp

    ()
    (Norges Bank (Central Bank of Norway))

  • Elvira Sojli

    ()
    (Erasmus University and Duisenberg School of Finance)

  • Wing Wah Tham

    (Erasmus University)

Abstract

We use the introduction and the subsequent removal of the flash order facility (an actionable indication of interest, IOI) from Nasdaq as a natural experiment to investigate the impact of voluntary disclosure of trading intent on market quality. We find that flash orders significantly improve liquidity in Nasdaq. In addition overall market quality improves substantially when the flash functionality is introduced and deteriorates when it is removed.

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File URL: http://www.norges-bank.no/en/Published/Papers/Working-Papers/2011/WP-201117/
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Bibliographic Info

Paper provided by Norges Bank in its series Working Paper with number 2011/17.

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Length: 59 pages
Date of creation: 15 Dec 2011
Date of revision:
Handle: RePEc:bno:worpap:2011_17

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Keywords: Actionable Indication of Interest (IOI); Flash orders; High-frequency Trading; Market quality; Market transparency; Sunshine trading;

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References

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Cited by:
  1. Hoffmann, Peter, 2012. "A dynamic limit order market with fast and slow traders," MPRA Paper 44621, University Library of Munich, Germany, revised Jan 2013.
  2. Hoffmann, Peter, 2012. "A dynamic limit order market with fast and slow traders," MPRA Paper 39855, University Library of Munich, Germany.
  3. Hoffmann, Peter, 2013. "A dynamic limit order market with fast and slow traders," Working Paper Series 1526, European Central Bank.

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