Dark matters? The effects of dark trading restrictions on liquidity and informational efficiency

Gbenga Ibikunle, Youwei Li, Davide Mare, Yuxin Sun

Research output: Working paper

Abstract

Using the double volume cap (DVC) regulation introduced under MiFID II in the European equity market, we show that stocks experiencing an enforced trading suspension in the dark pools suffer a deterioration in liquidity compared to those exempted from the trading halt. We also find that the limiting of trading in dark pools tends to reduce informational efficiency. Our results support recent theory arguing that dark venues encourage inter-venue order flow competition, underscoring the significance of dark trading for market quality.
Original languageEnglish
Number of pages46
Publication statusUnpublished - 2018

Keywords

  • dark trading
  • dark volume cap
  • liquidity
  • informational efficiency

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