Abstract
We examine the market quality effects of technology upgrades juxtaposed with short sale bans. Between 2011 and 2013, the Spanish Stock Exchange launched a smart trading platform (SIBE-Smart), imposed two short sale bans, and introduced colocation to facilitate high speed trading. We find that the SIBE-Smart introduction leads to reduced market quality. Although colocation improves some dimensions of liquidity, it does not attract additional high speed trading. Our results indicate that the effects of the two technology enhancements cannot overcome the negative effects of the short sale bans and overall market quality declines significantly. These results are in contrast to existing studies that attribute enhanced market quality to increased fast trading resulting from technological inducements. We conclude that the beneficial effects of technological upgrades that attract fast trading, improving liquidity and price efficiency, are negated in the presence of regulatory restrictions.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
