Trader Competition in Fragmented Markets: Liquidity Supply Versus Picking-Off Risk

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dc.catalogadorjca
dc.contributor.authorBernales, Alejandro
dc.contributor.authorGarrido, Nicolas
dc.contributor.authorSagade, Satchit
dc.contributor.authorValenzuela Bravo, Marcela
dc.contributor.authorWestheide, Christian
dc.date.accessioned2023-11-02T19:04:04Z
dc.date.available2023-11-02T19:04:04Z
dc.date.issued2023
dc.description.abstractBy employing a dynamic model with two limit order books, we show that fragmentation is associated with reduced competition among liquidity suppliers and lower picking-off risk of limit orders. Due to these countervailing channels, the impact of fragmentation on liquidity and welfare differs with asset volatility: When volatility is high (low), liquidity and aggregate welfare in a fragmented market are higher (lower) than in a single market. However, fragmentation always shifts welfare away from agents with exogenous trading motives and toward intermediaries. We empirically corroborate our model’s predictions about liquidity. Our model reconciles the mixed results in the empirical literature.
dc.fechaingreso.objetodigital2023-11-02
dc.fuente.origenCambridge University Press
dc.identifier.doi10.1017/S0022109022001521
dc.identifier.issn1756-6916
dc.identifier.urihttps://doi.org/10.1017/S0022109022001521
dc.identifier.urihttps://repositorio.uc.cl/handle/11534/75218
dc.information.autorucEscuela de Administración;Valenzuela Bravo, Marcela;S/I;16010
dc.language.isoen
dc.nota.accesoContenido completo
dc.pagina.final28
dc.pagina.inicio1
dc.revistaJournal of Financial and Quantitative Analysis
dc.rightsacceso abierto
dc.subjectTrade
dc.subject.ddc330
dc.subject.deweyEconomíaes_ES
dc.subject.ods08 Decent work and economic growth
dc.subject.odspa08 Trabajo decente y crecimiento económico
dc.titleTrader Competition in Fragmented Markets: Liquidity Supply Versus Picking-Off Risk
dc.typeartículo
sipa.codpersvinculados16010
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