Do Uninformed Crossed and Internalised Trades Tap into Unexpressed Liquidity?

Crossed and internalised upstairs trades are analysed in a data set in which institutional investors can be identified. Earlier findings that upstairs trading is uninformed, tap into unexpressed liquidity and do not affect market quality are revisited. The permanent price effect of crossings and internalised upstairs trades is significantly lower than that of limit order book trades due to that the least informed institutional trades are routed upstairs. Crossed and internalised trades affect the depth and transaction costs in the limit order book and a significant proportion of liquidity driven institutional trading is routed to the limit order book