The role of pre-existing liquidity in determining price efficiency and liquidity gains following the introduction of SETSmm

Patricia L. Chelley-Steeley

doi:10.1111/j.1468-036X.2013.12025.x

The role of pre-existing liquidity in determining price efficiency and liquidity gains following the introduction of SETSmm

Patricia L. Chelley-Steeley^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

Abstract

In this paper we examine the impact that the new trading system SETSmm had on market quality measures such as firm value, liquidity and pricing efficiency. This system was introduced for mid-cap securities on the London Stock Exchange in 2003. We show that there is a small SETSmm return premium associated with the announcement that securities are to migrate to the new trading system. We find that migration to SETSmm also improves liquidity and pricing efficiency and these changes are related to the return premium. We also find that these gains are stronger for firms with high pre SETSmm liquidity and weaker for firms with low SETSmm liquidity.

Original language	English
Pages (from-to)	360-376
Journal	European Financial Management
Volume	21
Issue number	2
Early online date	16 Sept 2013
DOIs	https://doi.org/10.1111/j.1468-036X.2013.12025.x
Publication status	Published - 2015

Keywords

liquidity
microstructure
pricing efficiency
trading system

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10.1111/j.1468-036X.2013.12025.x

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abstract = "In this paper we examine the impact that the new trading system SETSmm had on market quality measures such as firm value, liquidity and pricing efficiency. This system was introduced for mid-cap securities on the London Stock Exchange in 2003. We show that there is a small SETSmm return premium associated with the announcement that securities are to migrate to the new trading system. We find that migration to SETSmm also improves liquidity and pricing efficiency and these changes are related to the return premium. We also find that these gains are stronger for firms with high pre SETSmm liquidity and weaker for firms with low SETSmm liquidity.",

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The role of pre-existing liquidity in determining price efficiency and liquidity gains following the introduction of SETSmm

Abstract

Keywords

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