Inter- and intra-day liquidity patterns on the Stock Exchange of Hong Kong

Abstract

The purpose of this study is to investigate inter- and intra-day liquidity patterns in the Hong Kong equity market. The market making system of the Stock Exchange of Hong Kong (SEHK) is highly transparent and operates with minimal third party intervention. Liquidity is supplied solely by the submission of public limit orders through a fully-automated, order-driven trading system. The results reveal bid-ask spread patterns on the SEHK more similar to those of specialist systems than to those of multi-dealer systems, thereby providing useful evidence in distinguishing among competing market microstructure theories.