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

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 los...

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Autores principales: Ibikunle, Gbenga, Rzayev, Khaladdin
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Published by Elsevier Ltd on behalf of British Accounting Association. 2022
Materias:
Article
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9773701/
http://dx.doi.org/10.1016/j.bar.2022.101171
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author Ibikunle, Gbenga
Rzayev, Khaladdin
author_facet Ibikunle, Gbenga
Rzayev, Khaladdin
author_sort Ibikunle, Gbenga
collection PubMed
description 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.
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spelling pubmed-97737012022-12-22 Volatility and dark trading: Evidence from the Covid-19 pandemic()() Ibikunle, Gbenga Rzayev, Khaladdin The British Accounting Review Article 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. Published by Elsevier Ltd on behalf of British Accounting Association. 2022-12-22 /pmc/articles/PMC9773701/ http://dx.doi.org/10.1016/j.bar.2022.101171 Text en Crown Copyright © 2022 Published by Elsevier Ltd on behalf of British Accounting Association. Since January 2020 Elsevier has created a COVID-19 resource centre with free information in English and Mandarin on the novel coronavirus COVID-19. The COVID-19 resource centre is hosted on Elsevier Connect, the company's public news and information website. Elsevier hereby grants permission to make all its COVID-19-related research that is available on the COVID-19 resource centre - including this research content - immediately available in PubMed Central and other publicly funded repositories, such as the WHO COVID database with rights for unrestricted research re-use and analyses in any form or by any means with acknowledgement of the original source. These permissions are granted for free by Elsevier for as long as the COVID-19 resource centre remains active.
spellingShingle Article
Ibikunle, Gbenga
Rzayev, Khaladdin
Volatility and dark trading: Evidence from the Covid-19 pandemic()()
title Volatility and dark trading: Evidence from the Covid-19 pandemic()()
title_full Volatility and dark trading: Evidence from the Covid-19 pandemic()()
title_fullStr Volatility and dark trading: Evidence from the Covid-19 pandemic()()
title_full_unstemmed Volatility and dark trading: Evidence from the Covid-19 pandemic()()
title_short Volatility and dark trading: Evidence from the Covid-19 pandemic()()
title_sort volatility and dark trading: evidence from the covid-19 pandemic()()
topic Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9773701/
http://dx.doi.org/10.1016/j.bar.2022.101171
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