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The impact of multilateral trading facilities on price discovery

Buckle, Mike, Chen, Jing, Guo, Qian and Li, Xiaoxi 2018. The impact of multilateral trading facilities on price discovery. Financial Markets, Institutions and Instruments 27 (4) , pp. 145-165. 10.1111/fmii.12096

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Abstract

Our study aims to examine whether market segmentation and competition manifested in the proliferation of multilateral trading facilities (MTFs) improve market quality after the implementation of MiFID. To do this, we employ the Common Factor Weight and Weighted Price Contribution methods to study relative price discovery for three major MTFs—LSE, BATS, and Turquoise, using intra-day, five-minute transaction prices. The results suggest that the two trading venues, BATS and Turquoise, contribute more to impounding fundamental information, implying a shift in price dominance from traditional LSE to MTFs. In addition, the intra-day price contributions of MTFs are higher than those of LSE, especially during the first and last periods of the day. The estimated average daily price contributions are consistent with this result.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Mathematics
Subjects: H Social Sciences > HG Finance
Publisher: Wiley
ISSN: 0963-8008
Date of First Compliant Deposit: 8 December 2017
Date of Acceptance: 31 October 2017
Last Modified: 09 Sep 2019 12:54
URI: http://orca-mwe.cf.ac.uk/id/eprint/107376

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