Competition for Order Flow and Smart Order Routing Systems
Copyright policy )Competition for Order Flow and Smart Order Routing Systems
ABSTRACTWe study the rivalry between Euronext and the London Stock Exchange (LSE) in the Dutch stock market to test hypotheses about the effect of market fragmentation. As predicted by our theory, the consolidated limit order book is deeper after entry of the LSE. Moreover, cross‐sectionally, we find that a higher trade‐through rate in the entrant market coincides with less liquidity supply in this market. These findings imply that (i) fragmentation of order flow can enhance liquidity supply and (ii) protecting limit orders against trade‐throughs is important.
- School of Business and Economics, Finance Netherlands
- French National Centre for Scientific Research France
- Tinbergen Institute Netherlands
- Vrije Universiteit Amsterdam Netherlands
- University of Amsterdam Netherlands
[SHS.GESTION.FIN] Humanities and Social Sciences/Business administration/domain_shs.gestion.fin, SDG 17 - Partnerships for the Goals, market fragmentation; centralized limit order book; smart routers; trading fees; trade-throughs, centralized limit order book; market fragmentation; smart routers; trade-throughs; trading fees, Order Flow, Smart Order Routing, jel: jel:F18, jel: jel:G18, jel: jel:L13, jel: jel:F02, jel: jel:G24, jel: jel:G10, jel: jel:F12
[SHS.GESTION.FIN] Humanities and Social Sciences/Business administration/domain_shs.gestion.fin, SDG 17 - Partnerships for the Goals, market fragmentation; centralized limit order book; smart routers; trading fees; trade-throughs, centralized limit order book; market fragmentation; smart routers; trade-throughs; trading fees, Order Flow, Smart Order Routing, jel: jel:F18, jel: jel:G18, jel: jel:L13, jel: jel:F02, jel: jel:G24, jel: jel:G10, jel: jel:F12
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