The Impact of Introducing Intraday Auctions on LSE
|Researchers:||Peter Gomber, Satchit Sagade, Stefan Scharnowski, Erik Theissen, Christian Westheide|
|Category:||Financial Intermediation, Financial Markets|
This project was part of the team project "Complex Markets: Regulation and Incentives in Secondary Market Design".
Topic & Objectives
The growing popularity of venues which are not pre-trade transparent has been a cause for concern for exchanges (due to loss of market share), as well as for regulators and policymakers (due to potentially adverse impact on the price discovery process). Existing literature on the trade-off between different venues has mainly focused on the trading in multiple continuous markets, or in continuous markets on the one hand, and dark markets such as the Over-the-counter market or dark pools on the other. However, trade-offs involving call auctions have rarely been examined in the literature. In March 2016, the London Stock Exchange (LSE) introduced an intraday call auction ”…as an alternative to ‘dark pools’ for the matching of larger sized orders.” We examined this event as a quasi-natural experiment to understand how market share changes, specifically from dark pools but also from other lit and dark venues, after the introduction of this auction.