Norges Bank

Working Paper

Sunshine trading: Flashes of trading intent at the NASDAQ

Johannes A. Skjeltorp, Elvira Sojli and Wing Wah Tham
Working Paper

We use the introduction and the subsequent removal of the flash order facility (an actionable indication of interest, IOI) from Nasdaq as a natural experiment to investigate the impact of voluntary disclosure of trading intent on market quality. We find that flash orders significantly improve liquidity in Nasdaq. In addition overall market quality improves substantially when the flash functionality is introduced and deteriorates when it is removed.

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ISSN 1502-8143 (online)

Published 15 December 2011 14:30
Published 15 December 2011 14:30