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on Market Microstructure |
| By: | Batchimeg Sambalaibat (Indiana University) |
| Abstract: | OTC markets exhibit a core-periphery network: 10-30 central dealers trade frequently and with many dealers, while hundreds of peripheral dealers trade sparsely and with few dealers. Existing work rationalize this phenomenon with exogenous dealer heterogeneity. We build a search-based model of network formation and propose that a core-periphery network arises from specialization. Dealers endogenously specialize in different clients with different liquidity needs. The clientele difference across dealers, in turn, generates dealer heterogeneity and the core-periphery network: The dealers specializing in clients who trade frequently form the core, while the dealers specializing in buy-and-hold investors form the periphery. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:1278&r=mst |
| By: | Andrew Phiri (Nelson Mandela Metropolitan University [Port Elizabeth, South Africa]) |
| Abstract: | Using weekly data collected from 20.09.2008 to 09.12.2016, this paper uses dynamic threshold adjustment models to demonstrate how the introduction of high-frequency and algorithmic trading on the Johannesburg Stock Exchange (JSE) has altered convergence relations between the federal fund rate and equity returns for aggregate and disaggregate South African market indices. We particularly find that for the post-crisis period, the JSE appears to operate more efficiently, in the weak-form sense, under high frequency trading platforms. JEL Classifications: C32, C51, C52, E44, E52 |
| Keywords: | global financial crisis,high frequency trading,Colocation,threshold cointegration,Federal fund rates,Johannesburg Stock Exchange (JSE),equity returns |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-01861727&r=mst |
| By: | Getmansky, Mila; Jagannathan, Ravi; Pelizzon, Loriana; Schaumburg, Ernst; Yuferova, Darya |
| Abstract: | We study the role of various trader types in providing liquidity in spot and futures markets based on complete order-book and transactions data as well as cross-market trader identifiers from the National Stock Exchange of India for a single large stock. During normal times, short-term traders who carry little inventory overnight are the primary intermediaries in both spot and futures markets, and changes in futures prices Granger-cause changes in spot prices. However, during two days of fast crashes, Granger-causality ran both ways. Both crashes were due to large-scale selling by foreign institutional investors in the spot market. Buying by short-term traders and cross-market traders was insufficient to stop the crashes. Mutual funds, patient traders with better trade-execution quality who were initially slow to move in, eventually bought sufficient quantities leading to price recovery in both markets. Our findings suggest that market stability requires the presence of well-capitalized standby liquidity providers. |
| Keywords: | Liquidity Provision,Market Fragility,Flash Crash,Slow-Moving Capital |
| JEL: | G12 G14 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:227&r=mst |
| By: | Song Han; Alan G. Huang; Madhu Kalimipalli; Ke Wang |
| Abstract: | The Rule 144A private debt represents a significant and growing segment of the U.S. bond market. This paper examines the market liquidity effects of enhanced information disclosure induced by the public registration of 144A bonds. Using the regulatory version of TRACE data for the period 2002-2013, we find that following public registration of 144A bonds, dealer-specific effective bid-ask spreads narrow, especially for issues with higher ex-ante information asymmetry. Our results are consistent with existing theories that disclosure reduces information risk and thus improves market liquidity. |
| Keywords: | Rule 144A bond ; Public registration ; Information disclosure ; Broker-dealers ; Liquidity |
| JEL: | G12 G14 |
| Date: | 2018–08–30 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2018-61&r=mst |
| By: | Vollmer, Teresa; Von Cramon-Taubadel, Stephan |
| Abstract: | To know about the pricing process in agricultural spot and futures markets is important for every market participant. However, literature for the European market is rare. In this article we analyse price discovery in the European wheat market and focus especially on time periods with price turmoil. We find that price discovery is subject to structural changes over time and that the pattern of dominance in the pricing process alternates between the spot and futures market. Results suggest that neither price turmoil nor a change in the liquidity of the futures market is solely responsible for these structural changes. |
| Keywords: | Agricultural and Food Policy, Marketing |
| Date: | 2017–08–28 |
| URL: | http://d.repec.org/n?u=RePEc:ags:eaae17:261135&r=mst |