Dynamic information transmission within and across dark and lit markets

Speaker: Shino Takayama
Affiliation: The University of Queensland

Abstract

This paper contributes to the market microstructure theory literature by establishing a game-theoretic foundation for studying market fragmentation. In practice, traders seeking to mitigate price impact can strategically divide their original order demands into multiple orders, dispersing them across different market systems and time periods (see van Kervel et al., 2023). Nevertheless, it is not necessary that the effects of order splitting across different market systems and time periods are the same. Our analytical framework facilitates theoretical exploration of how informed traders solve this decision-making problem, shedding light on the diverse price impacts depending upon their strategic choices.