2011/02/03 by Angelo Carollo, Carollo, Angelo, Gabriella Vaglica +5
Economics, Econometrics and Finance · #FOS: Economics and business #Trading and Market Microstructure (q-fin.TR) #q-fin.TR
paper · pdf · doi:10.48550/arxiv.1102.0687
16 pages, 9 figures
arxiv created 2011/02/03 · arxiv updated 2015/03/18
We empirically study the trading activity in the electronic on-book segment and in the dealership off-book segment of the London Stock Exchange, investigating separately the trading of active market members and of other market participants which are non-members. We find that (i) the volume distribution of off-book transactions has a significantly fatter tail than the one of on-book transactions, (ii) groups of members and non-members can be classified in categories according to their trading profile (iii) there is a strong anticorrelation between the daily inventory variation of a market member due to the on-book market transactions and inventory variation due to the off-book market transactions with non-members, and (iv) the autocorrelation of the sign of the orders of non-members in the off-book market is slowly decaying. We also analyze the on-book price impact function over time, both for positive and negative lags, of the electronic trades and of the off-book trades. The unconditional impact curves are very different for the electronic trades and the off-book trades. Moreover there is a small dependence of impact on the volume for the on-book electronic trades, while the shape and magnitude of impact function of off-book transactions strongly depend on volume.