Hidden Liquidity: Some New Light on Dark Trading

Bloomfield, R; O'Hara, M; Saar, G

Hidden Liquidity: Some New Light on Dark Trading

Bloomfield, R O'Hara, M Saar, G

Permalink

Publication Type:: Journal Article
Citation:: Journal of Finance, 2015, 70 (5), pp. 2227 - 2274
Issue Date:: 2015-01-01

Closed Access

	Filename	Description	Size
	jofi12301.pdf	Published Version	1.24 MB	Adobe PDF	View/Open

Copyright Clearance Process

Recently Added
In Progress
Closed Access

This item is closed access and not available.

Full metadata record

Field	Value	Language
dc.contributor.author	Bloomfield, R	en_US
dc.contributor.author	O'Hara, M	en_US
dc.contributor.author	Saar, G	en_US
dc.date.issued	2015-01-01	en_US
dc.identifier.citation	Journal of Finance, 2015, 70 (5), pp. 2227 - 2274	en_US
dc.identifier.issn	0022-1082	en_US
dc.identifier.uri	http://hdl.handle.net/10453/122112
dc.description.abstract	© 2015 the American Finance Association. Using a laboratory market, we investigate how the ability to hide orders affects traders' strategies and market outcomes in a limit order book environment. We find that order strategies are greatly affected by allowing hidden liquidity, with traders substituting nondisplayed for displayed shares and changing the aggressiveness of their trading. As traders adapt their behavior to the different opacity regimes, however, most aggregate market outcomes (such as liquidity and informational efficiency) are not affected as much. We also find that opacity appears to increase the profits of informed traders but only when their private information is very valuable.	en_US
dc.relation.ispartof	Journal of Finance	en_US
dc.relation.isbasedon	10.1111/jofi.12301	en_US
dc.subject.classification	Finance	en_US
dc.title	Hidden Liquidity: Some New Light on Dark Trading	en_US
dc.type	Journal Article
utslib.citation.volume	5	en_US
utslib.citation.volume	70	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
utslib.for	1402 Applied Economics	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
utslib.copyright.status	closed_access
pubs.issue	5	en_US
pubs.publication-status	Published	en_US
pubs.volume	70	en_US

Abstract:

© 2015 the American Finance Association. Using a laboratory market, we investigate how the ability to hide orders affects traders' strategies and market outcomes in a limit order book environment. We find that order strategies are greatly affected by allowing hidden liquidity, with traders substituting nondisplayed for displayed shares and changing the aggressiveness of their trading. As traders adapt their behavior to the different opacity regimes, however, most aggregate market outcomes (such as liquidity and informational efficiency) are not affected as much. We also find that opacity appears to increase the profits of informed traders but only when their private information is very valuable.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/122112