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Sunshine trading: Flashes of trading intent at the NASDAQ

  • Johannes A. Skjeltorp

    ()

    (Norges Bank (Central Bank of Norway))

  • Elvira Sojli

    ()

    (Erasmus University and Duisenberg School of Finance)

  • Wing Wah Tham

    (Erasmus University)

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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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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