Trading European sovereign bonds: the microstructure of the MTS trading platforms

We study the microstructure of the MTS Global Market bond trading system, which is the largest interdealer trading system for Eurozone government bonds. Using a unique new dataset we find that quoted and effective spreads are related to maturity and trading intensity. Securities can be traded on a domestic and EuroMTS platform. We show that despite the apparent fragmentation of trading, both platforms are closely connected in terms of liquidity. We also study the intraday price order flow relation in the Euro bond market. We estimate the price impact of order flow and control for the intraday trading intensity and the announcement of macroeconomic news. The regression results show a larger impact of order flows during announcement days and a higher price impact of trading after a longer period of inactivity. We relate these findings to interdealer trading and to the structure of European bond markets. JEL Classification: F31, C32Bonds markets, Microstructure, order flow

Lot size constraints and market quality:evidence from the Borsa Italiana

Trading venues often impose a minimum lot size (minimum trade unit or MTU) to facilitate order execution. We document changes in market quality associated with the reduction of the MTU to one share on the Italian stock exchange, the Borsa Italiana. We observe a substantial improvement in liquidity, with an average decrease in the relative spread of 10.2%, and more significant improvements for those firms for which the MTU constraint was more binding. We also show that the improvement in liquidity is mainly driven by a reduction in adverse selection; that informational efficiency is not significantly affected; and there is an increase in retail trading. We interpret our findings in light of a model of asymmetric information in which the MTU affects traders’ choice of order size

NAMBER: A biotic index for assessing the ecological quality of mesophotic biogenic reefs in the northern Adriatic Sea

1. The aim of the present study was to propose a biotic index (North Adriatic Mesophotic BiogEnic Reefs, NAMBER) suitable for assessing the ecological quality of the mesophotic biogenic reefs of the northern Adriatic continental shelf based on photographic sampling. 2. At each of the 20 study sites, the degree of bioconstruction (expressed as percentage cover of crustose coralline algae), the α-diversity (expressed as the mean number of taxa), and the degree of sensitivity to human disturbance and climate change (based on literature data and expert judgement) of the benthic assemblages were selected as descriptors and combined in the NAMBER index, using the best values that the three metrics can currently achieve in the studied region as a reference. 3. The study highlighted that there was large spatial heterogeneity among reefs and high variability in the ecological quality values obtained by NAMBER, ranging from bad to high. The index indicates that reefs lying furthest from the coast, under substantially lower anthropogenic pressure, have a generally higher status of environmental quality. However, a clear geographical pattern did not emerge, as reefs close together often had different ecological qualities. 4. The NAMBER index, which combines three ecological descriptors, in accordance with the requirements of the European Marine Strategy Framework Directive, represents a specific adaptation to the northern Adriatic Sea of a multimetric index previously developed for the north-western Mediterranean Sea, capitalizing on previous knowledge and research efforts. 5. This multimetric biotic index provides an effective standardized tool for monitoring programmes and environmental impact assessments in the northern Adriatic mesophotic biogenic reefs and lays the foundation for ecosystem-based management and conservation in this basin

Spatial patterns and drivers of benthic community structure on the northern Adriatic biogenic reefs

The northern Adriatic Sea (NAS) hosts numerous biogenic subtidal reefs that are considered biodiversity hotspots. Several studies have already investigated the origin and biodiversity of these reefs. However, many of them are still unexplored and further knowledge is needed for their conservation. Here, the spatial variability, epibenthic community structure, and environmental features that characterize these habitats were investigated. Fifteen randomly selected reefs were sampled between 2013 and 2017, including some remote sites that have never been studied before. A fuzzy k-means clustering method and redundancy analysis were used to find similarities among sites in terms of epibenthic assemblages and to model relationships with abiotic variables. The results showed that these reefs are highly heterogeneous in terms of species composition and geomorphological features. The results were also consistent with previous studies and highlighted three main types of benthic assemblages defined by the dominance of different organisms, mainly reflecting the coastal-offshore gradient: nearshore reefs, generally dominated by stress-tolerant species; reefs at a middle distance from the coast, characterized by sponges, non-calcareous encrusting algae and ascidians; offshore reefs, dominated by reef builders. However, distance from the coast was not the only factor affecting species distribution, as other local factors and environmental characteristics also played a role. This kind of biogenic reefs in temperate seas are still poorly known. The present work contributed to shed further light on these habitats, by complementing the results of previous studies on their natural diversity, highlighting the specificity of the epibenthic communities of NAS reefs and the need to improve current, still inadequate, conservation measures

Informed Traders as Liquidity Providers: Anonymity, Liquidity and Price Formation

The tendency to introduce anonymity into financial markets apparently runs counter to the theory supporting transparency. This paper studies the impact of pre-trade transparency on liquidity in a market where risk-averse traders accommodate the liquidity demand of noise traders. When some risk-averse investors become informed, an adverse selection problem ensues for the others, making them reluctant to supply liquidity. Hence the disclosure of traders' identities improves liquidity by mitigating adverse selection. However, informed investors are effective liquidity suppliers, as their adverse selection and inventory costs are minimized. With endogenous information acquisition, transparency reduces the number of informed investors, thus decreasing liquidity. The type of information that traders hold and the effectiveness of insider trading regulation are crucial to distinguish between equilibria. Copyright 2008, Oxford University Press.

Market Makers as Information Providers: the Natural Experiment of STAR

Market makers are financial intermediaries who are supposed to provide additional liquidity, but do not have any information-related obligation. This paper studies the unique case of the Italian Stock Exchange, where market makers are also obliged to facilitate information disclosure about the firms they cover. We focus on a group of small/medium capitalization stocks (STAR) that are assigned a designated market maker (DMM) starting from 2001. We show that their liquidity requirements are not binding during the sample periods and that the main impact of DMMs' introduction is due to their obligations on information provision. We find that DMMs' activity as information providers reduces spread and price volatility, the probability of informed trading (PIN), and the adverse selection component of the spread. An event study provides evidence that the information released through DMMs is perceived as useful by market participant

Undisclosed orders and optimal submission strategies in a limit order market

Abstract: Reserve orders enable traders to hide a portion of their orders and now appear in most electronic limit order markets. This article outlines a theory to determine an optimal submission strategy in a limit order book, in which traders choose among limit, market, and reserve orders while simultaneously setting price, quantity, and exposure. We show that reserve orders help traders compete for the provision of liquidity and reduce the friction generated by exposure costs. Therefore, total gains from trade increase. Large traders always benefit from reserve orders, whereas small traders only benefit when the tick size is large

Market makers as information providers: The natural experiment of STAR

Market makers are financial intermediaries who are supposed to provide additional liquidity, but do not have any information-related obligation. This paper studies the unique case of the Italian Stock Exchange, where market makers are also obliged to facilitate information disclosure about the firms they cover. We focus on a group of small/medium capitalization stocks (STAR) that are assigned a designated market maker (DMM) starting from 2001. We show that their liquidity requirements are not binding during the sample periods and that the main impact of DMMs' introduction is due to their obligations on information provision. We find that DMMs' activity as information providers reduces spread and price volatility, the probability of informed trading (PIN), and the adverse selection component of the spread. An event study provides evidence that the information released through DMMs is perceived as useful by market participants.Designated market makers Information disclosure Limit order books Market quality Information asymmetries