London Stock Exchange Midday Auction

Abstract

The author investigates the success of the recently launched intraday auction at the London Stock Exchange (LSE) along various metrics such as liquidity, price deviation, and so on. This initiative is important because of the coming Markets in Financial Instruments Directive (MIFID II) regulations, which will set a limit on dark trading and seek to encourage larger trade sizes. The author finds that this initiative has been successful for finding liquidity (block trading) for midcap stocks but less so for the FTSE 100 stocks. Interestingly, he also finds that alternative venues such as BATS, Chi-X, and Turquoise stop being good sources for liquidity during the auction phase on the LSE.

TOPICS: Exchanges/markets/clearinghouses, developed