Trading places: Price leadership and the competition for order flow

I investigate the role of price leadership and informed trading in the competition for order flow between high-tech entrant trading venues and established national trading venues. An analysis of BATS Chi-X Europe (Chi-X), a high-tech entrant, and London Stock Exchange (LSE), an established national...

Full description

Saved in:
Bibliographic Details
Published in:Journal of empirical finance 2018-12, Vol.49, p.178-200
Main Author: Ibikunle, Gbenga
Format: Article
Language:English
Subjects:
Algorithmic trading
Dark trading
High-tech entrants
Multilateral trading facilities
Price discovery
Regulated markets
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:I investigate the role of price leadership and informed trading in the competition for order flow between high-tech entrant trading venues and established national trading venues. An analysis of BATS Chi-X Europe (Chi-X), a high-tech entrant, and London Stock Exchange (LSE), an established national exchange, suggests that Chi-X’s price leadership in the London market is critical to its acquisition of market share at LSE’s expense. Intraday variations in price leadership, driven by informed trading, liquidity constraints and institutional trading arrangements are, however inconsistent with the theoretical liquidity–efficiency link. Asymmetric effects of dark and algorithmic trading across the platforms are also reported. •Price leadership drives high-tech entrants’ acquisition of market share.•High-tech entrants’ price leadership linked to high frequency trading activity.•Incumbent venues’ institutional trading arrangements impair price leadership.•Impacts of high frequency and dark trading are asymmetric across venues and stocks.•Price discovery/leadership is intraday time-varying.
ISSN:0927-5398
1879-1727
DOI:10.1016/j.jempfin.2018.09.007