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The impact of dark trading and visible fragmentation on market quality

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  • Degryse, H.A.

    (Tilburg University, School of Economics and Management)

  • de Jong, F.C.J.M.

    (Tilburg University, School of Economics and Management)

  • van Kervel, V.L.

    (Tilburg University, School of Economics and Management)

Abstract

Two important characteristics of current equity markets are the large number of competing trading venues with publicly displayed order books and the substantial fraction of dark trading, which takes place outside such visible order books. This article evaluates the impact on liquidity of dark trading and fragmentation in visible order books. Dark trading has a detrimental effect on liquidity. Visible fragmentation improves liquidity aggregated over all visible trading venues but lowers liquidity at the traditional market, meaning that the benefits of fragmentation are not enjoyed by investors who choose to send orders only to the traditional market.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Degryse, H.A. & de Jong, F.C.J.M. & van Kervel, V.L., 2014. "The impact of dark trading and visible fragmentation on market quality," Other publications TiSEM a51b5d9e-2687-4972-930f-4, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:a51b5d9e-2687-4972-930f-417292f0681a
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    More about this item

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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