Shades of darkness: A pecking order of trading venues
Name
Zhu_Shades of darkness.pdf
Description
Accepted version
Size
466.45 KB
Format
Adobe PDF
Checksum (MD5)
23cfb1c878f24c12e6e63302b31b24dc
Author(s)
Menkveld, Albert J.
Yueshen, Bart Zhou
Zhu, Haoxiang
Date Issued
2017
Journal
Journal of Financial Economics
Publisher
Elsevier BV
Citation
Menkveld, Albert J., Bart Zhou Yueshen, and Haoxiang Zhu. "Shades of darkness: A pecking order of trading venues" Journal of Financial Economics vol. 24, no. 3 (2017): 503-534. © 2017.
Version
Author's final manuscript
Abstract
We characterize the dynamic fragmentation of U.S. equity markets using a unique data set that disaggregates dark transactions by venue types. The “pecking order” hypothesis of trading venues states that investors “sort” various venue types, putting low-cost-low-immediacy venues on top and high-cost-high-immediacy venues at the bottom. Hence, midpoint dark pools on top, non-midpoint dark pools in the middle, and lit markets at the bottom. As predicted, following VIX shocks, macroeconomic news, and firms’ earnings surprises, changes in venue market shares become progressively more positive (or less negative) down the pecking order. We further document heterogeneity across dark venue types and stock size groups. Keywords: dark pool, pecking order, fragmentation
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-NonCommercial-NoDerivs License
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.1016/J.JFINECO.2017.03.004
