Dealer Liquidity in an Auction Market: Evidence from the London Stock Exchange

SJ Friederich, R Payne

Research output: Contribution to journalArticle (Academic Journal)peer-review

11 Citations (Scopus)

Abstract

We analyse the trade characteristics and market conditions which determine the market share of a continuous auction trading system at the London Stock Exchange, where a network of broker-dealer firms is also available for trade. We show that execution and information risks govern the choice of execution venue. Further, we uncover strong commonality in the market share of the order book across stocks, and find that variables proxying for market-wide liquidity and informational risks also affect the choice of trading venue. Our results suggest that competing, off-book liquidity suppliers voluntarily perform at least some of the 'stabilisation' functions normally assigned to designated market-makers.
Translated title of the contributionDealer Liquidity in an Auction Market: Evidence from the London Stock Exchange
Original languageEnglish
Pages (from-to)1168 - 1191
Number of pages24
JournalEconomic Journal
Volume117 (552)
DOIs
Publication statusPublished - Jul 2007

Bibliographical note

Publisher: Blackwell

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