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Dr. McInish’s Paper Set For Publication in the Journal of Financial Economics

For release:  April 14, 2014

Dr. Thomas McInish, professor of the Department of Finance, Insurance and Real Estate and the holder of the Chair of Excellence, is set to have his paper, “Trading Rules, Competition for Order Flow and Market Fragmentation,” published in the Journal of Financial Economics, which is among the top journals of its discipline.

In this paper, McInish discusses the competition taking place between traditional stock exchanges and new ‘dark’ trading venues while noting an important difference in regulatory treatment. A regression discontinuity design is implemented that was used to find how spread constraints have significantly weakened the exchanges’ competitiveness. The paper demonstrates how a probability of subsequent order execution will increase as a result of more orders migrating to dark pools, which raises liquidity. The ability to circumvent time priority of displayed limit orders is listed as one of the causes of the rapid rise in U. S. equity market fragmentation, as well.

Dr. McInish co-authored this paper with Dr. Ronald Masulis, professor of Finance at the University of New South Wales – Australian School of Business and Amy Kwan, professor of Finance at the University of Sydney.

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Last Updated: 4/14/14