TY  - UNPD
A1  - Pelizzon, Loriana
A1  - Sagade, Satchit
A1  - Vozian, Katia
T1  - Resiliency: cross-venue dynamics with Hawkes processes
T2  - SAFE working paper series ; No. 291
N2  - Market fragmentation and technological advances increasing the speed of trading altered the functioning and stability of global equity limit order markets. Taking market resiliency as an indicator of market quality, we investigate how resilient are trading venues in a high-frequency environment with cross-venue fragmented order flow. Employing a Hawkes process methodology on high-frequency data for FTSE 100 stocks on LSE, a traditional exchange, and on Chi-X, an alternative venue, we find that when liquidity becomes scarce Chi-X is a less resilient venue than LSE with variations existing across stocks and time. In comparison with LSE, Chi-X has more, longer, and severer liquidity shocks. Whereas the vast majority of liquidity droughts on both venues disappear within less than one minute, the recovery is not lasting, as liquidity shocks spiral over the time dimension. Over half of the shocks on both venues are caused by spiralling. Liquidity shocks tend to spiral more on Chi-X than on LSE for large stocks suggesting that the liquidity supply on Chi-X is thinner than on LSE. Finally, a significant amount of liquidity shocks spill over cross-venue providing supporting evidence for the competition for order flow between LSE and Chi-X.
T3  - SAFE working paper - 291 
KW  - liquidity
KW  - resiliency
KW  - fragmentation
KW  - competition
KW  - high-frequency data
KW  - Hawkes processes
Y1  - 2020
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/55227
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-552274
N1  - First version: May 15th, 2019 ; This version: September 16th, 2020
IS  - 16 September 2020
PB  - SAFE
CY  - Frankfurt am Main
ER  -