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An international trend in market design: Endogenous effects of limit order book transparency on volatility, spreads, depth and volume

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Pham, TP and Westerholm, PJ (2013) An international trend in market design: Endogenous effects of limit order book transparency on volatility, spreads, depth and volume. Discussion Paper. University of Tasmania. (Unpublished)

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Abstract

Following other leading international securities markets, the Tokyo stock exchange [TSE] has adopted a publicly displayed but anonymous limit order book, and we ask: how is market quality affected? Accounting for fixed effects and endogeneity, we find increased volatility and higher
order book depth at the best bid and ask prices, while total depth is not significantly impacted. This predicts more competitive order strategies in a trading system with anonymous orders but with more visible price levels. Spreads are found to be unaffected by the market design change, in contradiction to previous literature. Complementing the literature, we find volume increases,
indicating that the aggregate effect of the design change is positive.

Item Type: Report (Discussion Paper)
Keywords: repec; Market Quality; Limit Order Book; Transparency
Publisher: University of Tasmania
Additional Information:

Copyright 2013 University of Tasmania

Date Deposited: 16 Oct 2013 02:08
Last Modified: 18 Nov 2014 04:55
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