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on Market Microstructure |
| By: | Cespa, Giovanni; Colla, Paolo |
| Abstract: | We study insider trading disclosure in a dynamic model where a security is traded in two venues by an insider together with noise traders, and prices are set by competitive dealers in each location, under two alternative information regimes. We first posit that markets are informationally segmented, in that market makers are privy to the information gathered in their venue. In this case, fragmentation has no effect on the price discovery impact of insider trades' disclosure. We then allow market makers in a given venue to also observe the other venue's past period price as well as a noisy signal of that venue's order flow. In this case, we show that if markets are sufficiently pre-trade transparent, disclosure can impair price discovery. |
| Keywords: | Disclosure of Insider Trades; Dissimulation; fragmentation; Informational efficiency; Market transparency; Price comovement |
| JEL: | G10 G12 G14 |
| Date: | 2016–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11690&r=mst |
| By: | Faith Chin; Corey Garriott |
| Abstract: | We document the outcome of an options decimalization pilot on Canada’s derivatives exchange. Decimalization improves measures of liquidity and price efficiency. The impact differs by the moneyness of an option and is greatest for out-of-the-money options. In contrast with equity studies, decimalization improved depth near the best prices and improved liquidity for larger trades. We conclude with advice on decimalizing options: options that benefit most have underlying volatility less than 40, underlying equity bid-ask spread less than 50 basis points, at least one trade a day, and a distribution of depth skewed toward marketable prices. |
| Keywords: | Financial markets, Financial system regulation and policies, Market structure and pricing |
| JEL: | G20 G14 L10 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:16-57&r=mst |
| By: | Rousse, O.; Sévi, B. |
| Abstract: | The weekly release of the U.S. inventory level by the DOE-EIA is known as the market mover in the U.S. oil futures market and to be a significant piece of information for all world oil markets in which the WTI is a price benchmark. We uncover suspicious trading patterns in the WTI futures markets in days when the inventory level is released that are higher than economists' forecasts: there are significantly more orders initiated by buyers in the two hours preceding the official release of the inventory level. We also show a clear drop in the average price of -0.25% ahead of the news release. This is consistent with informed trading. We also provide evidence of an asymmetric response of the oil price to the news, and highlight an over-reaction that is partly compensated in the hours following the announcement. |
| Keywords: | INSIDER TRADING;WTI CRUDE OIL FUTURES;INTRADAY DATA;INVENTORY RELEASE |
| JEL: | G13 G14 Q4 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:gbl:wpaper:2016-07&r=mst |