Market Fragmentation and Market Quality: The European Experience

Dark Market Share around Earnings Announcements and Speed of Resolution of Investor Disagreement

The Accounting Review ◽

10.2308/tar-2019-0397 ◽

2021 ◽

Author(s):

Karthik Balakrishnan ◽

Xanthi Gkougkousi ◽

Wayne R. Landsman ◽

Peeyush Taori

Keyword(s):

Market Share ◽

Earnings Announcements ◽

Accounting Information ◽

Market Quality ◽

Informational Efficiency ◽

Positive Relation ◽

High Quality ◽

Earnings Announcement ◽

Market Fragmentation ◽

Investor Disagreement

This study examines how the market share of dark venues changes at earnings announcements. Our analysis shows a statistically significant increase in dark market share in the weeks prior to, during, and following the earnings announcement. We also predict and find evidence that increases in dark market share around earnings announcements are higher for firms with high quality accounting information. In addition, we find a positive relation between the change in dark market share and the speed of resolution of investor disagreement-a key dimension of informational efficiency, which suggests that dark trading is associated with an improvement in market quality. How market fragmentation changes around news events, the role accounting information plays in market fragmentation, and how changes in market fragmentation relate to market quality can help provide insights to securities regulators.

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Order Routing Decisions for a Fragmented Market: A Review

Journal of Risk and Financial Management ◽

10.3390/jrfm14110556 ◽

2021 ◽

Vol 14 (11) ◽

pp. 556

Author(s):

Suchismita Mishra ◽

Le Zhao

Keyword(s):

Empirical Studies ◽

Equity Market ◽

Future Research ◽

Market Quality ◽

History Of ◽

Market Fragmentation ◽

Direct And Indirect Impacts ◽

Indirect Impacts ◽

Significant Attention ◽

The U.S

This paper reviews the up-to-date theoretical, empirical, and experimental literature related to the trading venue choice in the context of the fragmented equity markets. We provide a brief background on the history of trading fragmentation in the equity market and its determinants. We discuss the direct and indirect impacts of the market fragmentation on market quality in various dimensions, including liquidity, volatility, and price efficiency. Next, we identify possible determinants and channels from theoretical and empirical studies that could explain order routing decisions and present the possible directions for future research. Finally, we discuss the major regulatory reforms in the U.S. equity market on routing venue decisions. This topic is relevant in current times when phenomena such as “GameStop Frenzy” have drawn significant attention to commission-free trading venues.

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