Commonality in liquidity and multilateral trading facilities |
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| Authors: | Pankaj K Jain Mohamed Mekhaimer Sandra Mortal |
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| Institution: | 1. Department of Finance, Insurance, and Real Estate, The University of Memphis, Memphis, Tennessee;2. Department of Accounting and Finance, School of Business, St. John Fisher College, Rochester, New York;3. Department of Economics, Finance and Legal Studies, University of Alabama, Tuscaloosa, Alabama |
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| Abstract: | We use the introduction of two multilateral trading facilities (MTFs) to examine the impact of market fragmentation on commonality in liquidity. We find that the introduction of MTFs following the Markets in Financial Instruments Directive increases the comovement of stocks’ liquidity with MTF liquidity, while the comovement with the home market liquidity generally decreases. We also find that the higher the MTF trading volume or the number of MTFs trading a stock, the stronger the effect. Further, we find that the commonality in liquidity remains unchanged for a matched control sample of stocks that do not trade on MTFs. |
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| Keywords: | commonality in liquidity market fragmentation multilateral trading facilities NYSE-Arca Europe Turquoise G11 G12 G14 |
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