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Journal of Finance Vol. 60 No. 2 2005

Lifting the Veil: An Analysis of Pre‐trade Transparency at the NYSE

Ekkehart Boehmer1; Gideon Saar2,3,4; LEI YU

1 Texas A&M University · 2 Supélec · 3 University of Applied Sciences and Arts of Southern Switzerland · 4 Shandong University of Political Science and Law

open access

Abstract

We study pre‐trade transparency by looking at the introduction of NYSE's OpenBook service that provides limit‐order book information to traders off the exchange floor. We find that traders attempt to manage limit‐order exposure: They submit smaller orders and cancel orders faster. Specialists' participation rate and the depth they add to the quote decline. Liquidity increases in that the price impact of orders declines, and we find some improvement in the informational efficiency of prices. These results suggest that an increase in pre‐trade transparency affects investors' trading strategies and can improve certain dimensions of market quality.

DOI
10.1111/j.1540-6261.2005.00746.x
Volume
60
Issue
2
Pages
783-815
Language
en
Sources
bibtex:phds-export.bib crossref openalex

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