We analyze the consequences for liquidity provision of competing market makers operating at high frequency. Competition increases overall liquidity and deters the fast market maker's use of order flow signals. Using various liquidity metrics, we find that the market maker provides more liquidity...

We use a novel dataset to examine the impact of exposing institutional orders to electronic liquidity providers (ELPs). We present empirical evidence that marketable pieces of large parent orders are routed to ELPs, seemingly to avoid paying liquidity fees on exchanges. This routing decision...

We investigate the impact of an exogenous trading glitch at a high-frequency market-making firm on standard measures of stock liquidity (spreads, price impact, turnover, and depth) and institutional trading costs (implementation shortfall and VWAP slippage). Stocks in which the firm accumulates...

Insurance firms are a key player in the corporate bond market. In this study, we consider the role of life insurers as "rainy day" liquidity providers who improve liquidity in stressful conditions due to the nature of long-term buy-and-hold investments. To this end, we present evidence that...

This paper investigates the impact of exchange-traded funds (ETFs) on the liquidity of their underlying stockholdings. Using a difference-in-differences methodology for large changes in the index weights of stocks in the S&P 500 and NASDAQ 100 indexes, we find that increases in ETF ownership are...

The composition of natural liquidity has been changing over time. An analysis of intraday volumes for the S&P500 constituent stocks illustrates that (i) volume surprises, i.e., deviations from their respective forecasts, are correlated across stocks, and (ii) this correlation increases during...

Regulatory changes are transforming the multi-trillion dollar swaps market from a network of bilateral contracts to one in which swaps are cleared through central counterparties (CCPs). The stability of the new framework depends on the resilience of CCPs. Margin requirements are a CCP's first...