Publication Type
Journal Article
Version
acceptedVersion
Publication Date
6-2017
Abstract
We characterize the dynamic fragmentation of U.S. equity markets using a unique data set that disaggregates dark transactions by venue types. The "pecking order" hypothesis of trading venues states that investors "sort" various venue types, putting low-cost-low-immediacy venues on top and high-cost-high-immediacy venues at the bottom. Hence, midpoint dark pools on top, non-midpoint dark pools in the middle, and lit markets at the bottom. As predicted, following VIX shocks, macroeconomic news, and firms' earnings surprises, changes in venue market shares become progressively more positive (or less negative) down the pecking order. We further document heterogeneity across dark venue types and stock size groups. Published by Elsevier B.V.
Keywords
Dark pool, Pecking order, Fragmentation
Discipline
Finance and Financial Management | Portfolio and Security Analysis
Research Areas
Finance
Publication
Journal of Financial Economics
Volume
124
Issue
3
First Page
503
Last Page
534
ISSN
0304-405X
Identifier
10.1016/j.jfineco.2017.03.004
Publisher
Elsevier
Citation
MENKVELD, Albert J.; YUESHEN, Bart Zhou; and ZHU, Haoxiang.
Shades of darkness: A pecking order of trading venues. (2017). Journal of Financial Economics. 124, (3), 503-534.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7283
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.jfineco.2017.03.004