- Sviatoslav Rosov, PhD, CFA
Two practitioner concerns regarding modern market structure are examined: (1) whether pretrade transparent (or “lit”) liquidity provision is disincentivised by off-exchange trading, thus possibly increasing adverse selection risk, and (2) whether the resilience of liquidity has declined over time. Data from the US, UK, and French equity markets during the period 2010–2014 provide some evidence that off-exchange trading increases the probability of adverse selection on lit venues. No conclusive evidence is found consistent with a decline in the resilience of liquidity.
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Publisher Information
CFA Institute 54 pages doi.org/10.2469/ccb.v2015.n7.1 ISSN/ISBN: 978-1-942713-11-1