Title

Lifting the Veil: An Analysis of Pre-trade Transparency at the NYSE

Publication Type

Journal Article

Publication Date

4-2005

Abstract

We study pre-trade transparency by looking at the introduction of NYSE's OpenBook service that provides limit-order book information to traders off the exchange floor. We find that traders attempt to manage limit-order exposure: They submit smaller orders and cancel orders faster. Specialists' participation rate and the depth they add to the quote decline. Liquidity increases in that the price impact of orders declines, and we find some improvement in the informational efficiency of prices. These results suggest that an increase in pre-trade transparency affects investors' trading strategies and can improve certain dimensions of market quality.

Discipline

Business | Finance and Financial Management | Portfolio and Security Analysis

Research Areas

Finance

Publication

Journal of Finance

Volume

60

Issue

2

First Page

783

Last Page

815

ISSN

1540-6261

Identifier

10.1111/j.1540-6261.2005.00746.x

Publisher

Wiley

Additional URL

http://dx.doi.org/10.1111/j.1540-6261.2005.00746.x