Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
We examine the impact on the quality of a securities market of hiding versus displaying orders that provide liquidity. Display expropriates informational rents from informed agents who trade as liquidity providers. The informed then exit liquidity provision in favor of demanding liquidity where they trade less aggressively. Trading costs to uninformed liquidity demanders are higher, bid-ask spreads are wider, and midquotes are less informationally efficient when orders that provide liquidity are displayed. Our analysis suggests that market innovations, which might seem to favor the informed over the uninformed, can enhance market quality by intensifying competition among the informed. The Author 2013. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: [email protected]., Oxford University Press.