Prior studies that examine the relation between market depth and bid-ask spread are often limited to the first level of the limit order book. However, the full limit order book provides important information beyond the first level about the depth and spread, which affects the trading decisions...

Determinants of bid-ask spread have been explored significantly for low-frequency datasets in many developed markets. Researchers have identified share price, traded volume, market-capitalization, return volatility, and number of trades as the prime spread drivers. However, the validity of these...

The purpose of this study is to examine the role of options volatility and bid-ask spread as microstructural variables in determining whether the foreign exchange market’s price formation process in response to macroeconomic announcements is characterised by changes in risk perception and...

We study liquidity provision by competitive high-frequency trading firms (HFTs) in a dynamic trading model with private information. Liquidity providers face adverse selection risk from trading with privately informed investors and from trading with other HFTs that engage in latency arbitrage...

We provide empirical evidence within the context of cryptocurrency markets that the returns from liquidity provision, proxied by the returns of a short-term reversal strategy, are primarily concentrated in trading pairs with lower levels of market activity. Empirically, we focus on a moderately...

We examine daily short-selling activity and prices around reverse stock splits. Using a difference-in-difference approach with a matched sample of reverse splitting and non-reverse splitting stocks, we show that short selling increases in stocks that reverse split, relative to those that do not....

As financial markets transition from the London Interbank Offered Rate (Libor) to alternative benchmark rates, lenders in floating rate debt lose the hedging benefits provided by Libor because the alternative reference rates are credit-insensitive overnight rates. Comparing the yield spreads of...

In a tractable model of over-the-counter markets where each investor can arbitrarily distribute her search capacity across other investors, the holdings of an asset are endogenously concentrated among a subgroup of investors. Investors who are more likely to hold the asset search among those...

This study explores how stock liquidity shapes a firm’s cost behavior using the Tick Size Pilot Program (TSPP) as a natural experiment. We find that an exogeneous increase in the minimum tick size for small cap stocks leads to an increase in SG&A cost stickiness in these pilot firms,...

This paper examines whether larger tick sizes improve or hinder price efficiency using data from implementing and terminating the Tick Size Pilot Program (TSP). We show that the TSP led to increases in various liquidity measures, and its termination restored them to their pre-TSP levels. We also...

This paper studies a recent tick size reduction in the U.S. Treasury securities market and identifies its effects on the market's liquidity and price efficiency. Employing difference-indifference regressions, we find that the bid-ask spread narrows significantly after the change, even for large...

This paper contributes to the debate concerning the benefits and disadvantages of introducing a European Sovereign Bond-Backed Securitisation (SBBS) to address the need for a common safe asset that would break destabilising bank-sovereign linkages. The analysis focuses on assessing the...

The present paper considers a class of financial market with transaction costs and constructs a geometric no-arbitrage analysis frame. Then, this paper arrives at the fact that this financial market is of no-arbitrage if and only if the curvature 2-form of a specific connection is zero....

We test the impact of stock split rule changes on liquidity behavior in Bursa Malaysia during 2004-2020. Using event study methodology, this study examines stock liquidity on and around stock split days through three subperiods of study, including the first (2004-2006), second (2007-2009), and...

It is well known that intraday returns tend to reverse the following intraday period, conditional on excess buying pressure on the bid or ask side. This suggests that liquidity providers "overreact" to order imbalance (OIB) by initially altering quotes so much that a negative autocorrelation is...

This paper compares performances of bid-ask spread measures and analyzes bond-level characteristics' effects on the bid-ask spread for Turkish sovereign bonds traded in Borsa Istanbul. We use intraday order data to establish a relative quoted bid-ask spread as a benchmark and compare bid-ask...

Prior studies that examine the relation between market depth and bid-ask spread are often limited to the first level of the limit order book. However, the full limit order book provides important information beyond the first level about the depth and spread, which affects the trading decisions...

We consider loans being marked to market to constitute new information that is only immediately available to large institutional traders, so-called qualified institutional buyers (QIBs). Smaller investors (non-QIBs) do not have instant access to such information. Investigating the effects of...

Instead of using the classical block-shaped market depth to build the optimal execution model, this work studies the constrained optimal execution problem in a limit order book (LOB) market with a power-shaped market depth. Different from the linear price impact derived from the framework of...

Automated market makers (AMMs) are algorithms that pool liquidity and make it available to liquidity takers by automatically and algorithmically determining an execution price of a trade. In the recent markets for digital assets, a growing number of blockchain-based decentralized exchanges (DEX)...

Does the stock price efficiency, i.e. the speed and the extent with which prices reflect public information, affect corporate innovation? Using the intensity of algorithmic trading (AT) to capture price efficiency and the Tick Size Pilot experiment setting, we establish a causal positive...

So-called `latency' refers to the various small but significant time delays that occur in the course of the communications between a trader and a market. Such delays happen between the time an exchange streams market data to a trader, the time at which the trader processes the information and...

We propose a novel estimation procedure of bid-ask spreads from open, high, low, and close prices. Our estimator is asymptotically unbiased and optimally combines the full set of price data to minimize the estimation variance. When quote data are not available, our estimator generally delivers...

The Chicago Board Options Exchange concurrently listed European-style and American-style options on the Standard and Poor's 500 Index from April 2, 1986 through June 20, 1986. This unique time period allows for a direct measurement of the early-exercise premium in American-style index options....

In this paper, we show both theoretically and empirically that the size of over-the-counter (OTC) markets can be reduced without affecting individual net positions. First, we find that the networked nature of these markets generates an excess of notional obligations between the aggregate gross...

This paper analyzes the limit order book events arrival dependency structure using high-dimensional Hawkes processes. We seek for recurrent relationships among events from a set of 86 event types which in addition to transactions, includes limit order submissions and cancellations taking place...

Comonotone additivity for two price economy bid and ask prices motivates combining bid prices for call options with the ask prices for puts and the converse to construct two densities (termed lower and upper) reflected by these prices. Bilateral gamma models are fit to estimate these the lower...

In traditional over-the-counter (OTC) markets, investors trade bilaterally through intermediaries referred to as dealers. An important regulatory question is whether to centralize OTC markets by shifting trades onto centralized platforms. We address this question in the context of the liquid...

Obtaining a unique limit order dataset provided by NYSE, we find there exits significant commonality in the liquidity provided by the NYSE limit order book. We also examine how the commonality documented above can explain the commonality in bid-ask spread, and how this commonality in limit order...

Employing the SEC Tick Size Pilot Program that increases the minimum trading unit of a set of randomly selected small-capitalization stocks, we examine whether and how an exogenous change in stock liquidity affects corporate voluntary disclosure. Using difference-in-differences analyses with...