We investigate the effects of introducing a central clearing counterparty (CCP) on securities prices by adopting as an experimental construct the 2009 CCP reform in three Nordic markets. We find that, relative to other European economies, these countries experience market-adjusted equity returns...

Signed customer order flow correlates with permanent price changes in equity and nonequity markets. We exploit macro news events in the 30Y treasury futures market to identify causality from customer flow to riskfree rates. We remove the positive feedback trading part and establish that, in the...

Speeding up the exchange does not necessarily improve liquidity. The price quotes of high-frequency market makers are more likely to meet speculative high-frequency "bandits", thus less likely to meet liquidity traders. The bid-ask spread is raised in response. The recursive dynamic model...

This discussion paper led to an article in the <I>Journal of Financial Markets </I> (2013). Volume 16, pages 571-603.<P> This paper links the recent fragmentation in equity trading to high frequency traders (HFTs). It shows how the success of a new market, Chi-X, critically depended on the participation...</p></i>

The arrival of high-frequency traders (HFTs) coincided with the entry of new markets and, subsequently, strong fragmentation of the order flow. These trends might be related as new markets serve HFTs who seek low fees and high speed. New markets only thrive on competitive price quotes that...

Macro announcements change the equilibrium risk-free rate. We find that Treasury prices reflect part of the impact instantaneously, but intermediaries rely on their customer order flow after the announcement to discover the full impact. This customer flow informativeness is strongest when...

This paper uses the perfect market segmentation setting in China’s stock market to examine whether foreign investors are at informational disadvantage relative to domestic investors. We analyze the price discovery roles of the A- (domestic investors) and B-share (foreign investors) markets in...

Securities are increasingly traded through multiple venues. Chowdhry and Nanda (1991) show that sophisticated investors benefit by splitting orders across markets at the cast of local investors who only trade through one venue. If trading hours do not perfectly overlap, we can test for...

We study sovereign yield dynamics and order flow in the largest euro-area treasury markets. We exploit unique transaction data to explain daily yield changes in the ten­year government bands of Italy, France, Belgium, and Germany. We use a state space model to decompose these changes into (i) a...

We examine the effect of information asymmetry on equity prices in the local A- and foreign Bshare market in China. We construct measures of information asymmetry based on market microstructure models, and find that they explain a significant portion of cross-sectional variation in B-share...