Title: The Impact of Order Protection Rule on Market Liquidity and Price Discovery
Abstract: This paper examines the impact of the Order Protection Rule on market liquidity and the efficiency of price discovery in the U.S. and Canadian markets. Overall, we find increased trading activities due to reduced transaction costs. In the U.S. markets, using the difference in differences methodology, we find a more efficient price discovery process, and the increased liquidity mainly happens to lit markets. In the Canadian markets, we find the significant improvement in quoted depth and percentage time at the national best bid and offer in small trading venues. Our findings are contrary to previous studies and shed light on potential causes of the variation.
Publication Year: 2018
Publication Date: 2018-01-01
Language: en
Type: article
Indexed In: ['crossref']
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