The Causal Impact of Market Fragmentation on Liquidity

The Causal Impact of Market Fragmentation on Liquidity
Professors Peter H. Haslag and Matthew Ringgenberg of Washington University – Olin Business School find “fragmentation has a differential impact on large and small stocks. For large stocks, the former effect dominates and market quality, as measured by bid-ask spreads and price efficiency, is generally better. For small stocks, we find that negative network externalities dominate and liquidity and price efficiency are worse.”