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Does smile help detect the UK's price leadership change after MiFID?

Mike Buckle Orcid Logo, Jing Chen, Qian Guo, Xiaoxi Li

International Review of Economics and Finance, Volume: 84, Pages: 756 - 769

Swansea University Author: Mike Buckle Orcid Logo

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DOI (Published version): 10.1016/j.iref.2022.11.033

Abstract

We investigate intraday realised volatility, trading volume, and information transmission following a series of changes to the Markets in Financial Instruments Directive (MiFID) in the UK. We find that multilateral trading facilities attract order flows from the London Stock Exchange (LSE) and hence...

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Published in: International Review of Economics and Finance
ISSN: 1059-0560
Published: Elsevier BV 2023
Online Access: Check full text

URI: https://cronfa.swan.ac.uk/Record/cronfa62084
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Abstract: We investigate intraday realised volatility, trading volume, and information transmission following a series of changes to the Markets in Financial Instruments Directive (MiFID) in the UK. We find that multilateral trading facilities attract order flows from the London Stock Exchange (LSE) and hence introduce new dynamics to market provisions, such as volatility and information transmission. In addition, the structure of the order books and market depth changed after the introduction of MiFID in the UK. However, our novel study conveying smile patterns of volatility and volume suggests that the LSE continues to lead the rest of the multilateral venues. This shows that although MiFID has led to market segmentation, there is still clear price discovery among multilateral trading facilities.
Keywords: MiFID; Multilateral trading facility; Volatility smile; Weighted price contribution
College: Faculty of Humanities and Social Sciences
Start Page: 756
End Page: 769

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