TY - JOUR T1 - Trading Patterns, Liquidity, and the Citigroup Split JF - The Journal of Trading SP - 18 LP - 33 DO - 10.3905/jot.2011.6.4.018 VL - 6 IS - 4 AU - Milan Borkovec AU - Ian Domowitz AU - Konstantin Tyurin Y1 - 2011/09/30 UR - https://pm-research.com/content/6/4/18.abstract N2 - The Citigroup reverse split is of interest with respect to the reaction of market activity to changes in the float characteristics of a large actively traded company. Using a two-month window around the Citigroup event, we observe a shift in trading activity from alternative markets to exchanges, accompanied by increases in trade size on alternative markets with corresponding decreases on the exchanges. Quoting, hidden order execution, and order cancelation activity is up, leading to a decrease in the ratio of trades relative to quotes. The toxicity of order flow falls to very low levels relative to presplit trading. The shape of the limit order book changes dramatically, leading to lower quoted and effective spreads, lower depth at the top of the limit order book, and higher midquote volatility relative to their presplit values. The cost of liquidity falls for moderate order sizes and rises rapidly for large blocks of stock. We provide corroborative evidence from reverse splits of other liquid U.S. common stocks and ETFs between January 2009 and May 2011 and confirm most of the stylized facts reported for Citigroup. In some important respects, however, the Citigroup reverse split stands out as a genuine outlier that reflects the unique character of this rare event.TOPICS: Exchange-traded funds and applications, volatility measures ER -