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Retail Order Flow Segmentation

Author

Listed:
  • Corey Garriott
  • Adrian Walton

Abstract

In August 2012, the New York Stock Exchange launched the Retail Liquidity Program (RLP), a trading facility that enables participating organizations to quote dark limit orders executable only by retail traders. A Hasbrouck (1991) structural vector autoregression shows that the facility increased the information content of the order flow by distinguishing retail trades from relatively more informed trades. A differences-in-differences event study finds that the RLP launch impacted market quality. Stocks with substantial RLP activity experienced mildly improved relative bid-ask spreads, effective spreads, price impacts and return autocorrelations in both the RLP and non-RLP segments.

Suggested Citation

  • Corey Garriott & Adrian Walton, 2016. "Retail Order Flow Segmentation," Staff Working Papers 16-20, Bank of Canada.
    • Handle: RePEc:bca:bocawp:16-20
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    References listed on IDEAS

    as
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    Cited by:

    1. Jain, Pankaj K. & Linna, Jared A. & McInish, Thomas H., 2021. "An examination of the NYSE’s retail liquidity program," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 367-373.

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    More about this item

    Keywords

    Financial markets; Financial system regulation and policies; Market structure and pricing;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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