Prevailing research posits that liquidity providers bypass long queue lines on exchanges by offering liquidity in dark venues with de minimis sub-penny price improvement, thus exploiting an exception to the penny quote rule. We show that (a) the SEC enforces the quote rule to prevent sub-penny...

The dynamics between coexisting experts and non-experts has important implications for online market and platform design. We study their relationship in the context of crowdfunding. While crowdfunding originated as a non-expert market, experts have become active participants. We investigate the...

Using data from the 2016-2018 tick size pilot study, we examine the efficacy of using wider tick sizes to subsidize market-making in small capitalization stocks. We demonstrate that realized spreads decay quickly within the initial microseconds of a trade. The effect reduces the subsidy offered...

Using new data from the two U.S. securities information processors (SIPs) between August 6, 2015 and June 30, 2016, we examine claims that high-frequency trading (HFT) firms use direct feeds to exploit traders who rely on SIP prices. Across $3.7 trillion of trades, the SIPs report quote updates...

The composition of amounts outstanding in over-the-counter derivatives shifted towards the euro and cleared instruments. Since the Great Financial Crisis, increases in central clearing rates have helped shape growth in amounts outstanding. Derivatives subject to regulatory clearing mandates were...

The advent of Bitcoin in 2009 has not only introduced Cryptocurrencies and lead to a new digitization movement in the financial, especially payments industry but also made way for a new breed of innovative technologies based on decentralized digital currencies. Generally, decentralized consensus...

Special Purpose Acquisition Companies (SPACs) are simply enterprises that raise money from the public with the intention of purchasing an existing business and become publicly-traded in the securities markets. If the SPAC is successful in raising money and the acquisition takes place, the target...

Traditional odd lot trades (i.e., trades involving fewer than 100 shares) now comprise over half of all equity trades on U.S. exchanges. Under Regulation National Market System, however, these trades are excluded from a market center’s trade execution statistics. In addition, while brokers are...

The modern financial system is plagued by misaligned incentives that allow some firms to extract distributive profits, and direct wealth transfers in their favor, without producing anything of value, or improving society with enhanced employment or socially useful innovation. Many modern...

This ESRB Occasional Paper complements the publication of indicators on central counterparties (CCPs) in the ESRB's Risk Dashboard as part of its monitoring framework. It provides a methodological background to the development of the individual measures and discusses different aspects that...