Volatility and dark trading: Evidence from the Covid-19 pandemic

Gbenga Ibikunle, Khaladdin Rzayev*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract / Description of output

We study the effect(s) of volatility on the share of trading in dark pools by exploiting the exogenous shock of the Covid-19 pandemic on financial markets and regulatory restrictions on dark trading. We find that high levels of volatility in lit exchanges is linked to an economically significant loss of market share by dark pools to lit exchanges. In line with the theory, the loss appears to be driven by informed traders’ migration from lit to dark markets during high volatility periods. The market quality implications of the trading dynamics are mixed: while it tempers liquidity decline in the lit market, it exacerbates the loss of informational efficiency.
Original languageEnglish
Article number101171
Pages (from-to)1-23
Number of pages23
JournalThe British Accounting Review
Issue number4
Early online date22 Dec 2022
Publication statusPublished - Jul 2023

Keywords / Materials (for Non-textual outputs)

  • Covid-19
  • dark pools
  • venue selection
  • liquidity
  • market quality


Dive into the research topics of 'Volatility and dark trading: Evidence from the Covid-19 pandemic'. Together they form a unique fingerprint.

Cite this