Document de travail

Liquidity Supply across Multiple Trading Venues

Laurence Lescourret et Sophie Moinas

Résumé

Market fragmentation and technology have given rise to new trading strategies. One of them is to supply liquidity simultaneously across multiple trading venues, which requires multi-venue management of inventory risk. We build an inventory model in which order ow fragments across two venues, and show that multi-venue market-makers might consolidate the fragmented order ow, leading to lower transaction costs. We also show that multi-venue market-making strategies result in interrelated spreads. We empirically investigate the main predictions of our model using Euronext proprietary data that contain member's orders and trades identities for multi-listed firms. We find evidence of cross-venue inventory control, in particular for formally registered market-makers. We also find that bid-ask spreads vary with inventories of multi-venue market-makers and the way order ow fragments across all venues, as uniquely predicted by our model.

Mots-clés

Market fragmentation; multi-venue market-making; bid-ask spreads;

Remplacé par

Laurence Daures-Lescouret et Sophie Moinas, « Fragmentation and Strategic Market-Making », Journal of Financial and Quantitative Analysis, vol. 58, n° 4, juin 2023, p. 1675–1700.

Référence

Laurence Lescourret et Sophie Moinas, « Liquidity Supply across Multiple Trading Venues », TSE Working Paper, n° 14-533, octobre 2014, révision mars 2015.

Voir aussi

Publié dans

TSE Working Paper, n° 14-533, octobre 2014, révision mars 2015