Flashes of trading intent at the NASDAQ

Elvira Sojli, WW Tham, J Skjeltorp

Research output: Contribution to journalArticleAcademicpeer-review

3 Citations (Scopus)

Abstract

We use the introduction and subsequent removal of the flash-order functionality from NASDAQ as a natural experiment to investigate the impact of voluntary disclosure of trading intent on market quality. We find that flash orders significantly improve liquidity in NASDAQ. Furthermore, overall market quality improves (deteriorates) when flash functionality is introduced (removed). This result can be attributed to increased competition among liquidity suppliers across competing trading venues. Alternatively, flash orders attract responses from reactive traders immediately after the announcement, attracting more “hidden liquidity” and lowering risk-bearing costs for the overall market.
Original languageEnglish
Pages (from-to)165-196
Number of pages32
JournalJournal of Financial and Quantitative Analysis
Volume51
Issue number1
DOIs
Publication statusPublished - 2016

Research programs

  • EUR ESE 31
  • RSM F&A

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