A tale of two cities


Scharnowski, Stefan ; Theissen, Erik ; Westheide, Christian ; Satchit, Sagade



URL: https://ssrn.com/abstract=3475442
Document Type: Working paper
Year of publication: 2019
The title of a journal, publication series: SSRN Working Paper Series
Place of publication: Rochester, NY
Publication language: English
Institution: Business School > ABWL u. Finanzierung (Theissen)
Subject: 330 Economics
Abstract: We study the introduction of a microwave link between Frankfurt and London and identify its effects on German stocks that trade in both locations using French firms that trade only in London as the control group. We find that the link improves the integration between the two markets as evidenced by a reduction in arbitrage opportunities. The effects on market quality differ across stocks as high-frequency traders strategically utilize their speed advantage to supply or consume liquidity. In London, mid cap stocks benefit from increased liquidity provision whereas order flow for large stocks becomes more toxic. London's increased competitiveness for mid cap stocks also translates into an increase in its information share, while the information shares of large cap stocks are unchanged. These results suggest that market integration differently affects investors based on their speed advantage, trading venues based on their level of competitiveness, and stocks based on their size.

Dieser Eintrag ist Teil der Universitätsbibliographie.




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Scharnowski, Stefan ORCID: 0000-0002-3755-1821 ; Theissen, Erik ORCID: 0000-0003-4460-8168 ; Westheide, Christian ; Satchit, Sagade (2019) A tale of two cities. SSRN Working Paper Series Rochester, NY [Working paper]


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