nep-mst 2023-04-10 papers

on Market Microstructure

Issue of 2023‒04‒10
two papers chosen by
Thanos Verousis

Dark trading and financial markets stability By Gonçalves, Jorge; Kräussl, Roman; Levin, Vladimir
Multi-kernel property in high-frequency price dynamics under Hawkes model By Kyungsub Lee

Dark trading and financial markets stability

By:	Gonçalves, Jorge; Kräussl, Roman; Levin, Vladimir
Abstract:	This paper examines how the implementation of a new dark order - Midpoint Extended Life Order on NASDAQ - impacts financial markets stability in terms of occurrences of mini-flash crashes in individual securities. We use high-frequency order book data and apply panel regression analysis to estimate the effect of M-ELO trading on market stability and liquidity provision. The results suggest a predominance of a speed bump effect of M-ELO rather than a darkness effect. We find that the introduction of M-ELO increases market stability by reducing the average number of mini-flash crashes, but its impact on market quality is mixed.
Keywords:	Market microstructure, financial market stability, mini-flash crash, dark trading, speed bump, investor protection
JEL:	G10 G14
Date:	2023
URL:	http://d.repec.org/n?u=RePEc:zbw:cfswop:691&r=mst

Multi-kernel property in high-frequency price dynamics under Hawkes model

By:	Kyungsub Lee
Abstract:	This study investigates and uses multi-kernel Hawkes models to describe a high-frequency mid-price process. Each kernel represents a different responsive speed of market participants. Using the conditional Hessian, we examine whether the numerical optimizer effectively finds the global maximum of the log-likelihood function under complicated modeling. Empirical studies that use stock prices in the US equity market show the existence of multi-kernels classified as ultra-high-frequency (UHF), very-high-frequency (VHF), and high-frequency (HF). We estimate the conditional expectations of arrival times and the degree of contribution to the high-frequency activities for each kernel.
Date:	2023–02
URL:	http://d.repec.org/n?u=RePEc:arx:papers:2302.11822&r=mst

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