Order Flow and Liquidity around NYSE Trading Halts

Authors

  • Shane A. Corwin,

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    • Corwin and Lipson are from the Terry College of Business at the University of Georgia. We thank Franklin Allen, Jeff Bacidore, Michael Goldstein, Jeff Harris, Ken Kavajecz, Jeff Netter, George Sofianos, Dan Weaver, and seminar participants at the Federal Reserve Bank of Atlanta, the University of Minnesota, Vanderbilt University, the University of Virginia, and the NYSE JB Seminar for helpful comments. We are also grateful to the New York Stock Exchange for providing data. The comments and opinions expressed in this paper are the authors' and do not necessarily reflect those of the directors, members, or officers of the New York Stock Exchange, Inc. The authors are responsible for any errors.
  • Marc L. Lipson

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    • Corwin and Lipson are from the Terry College of Business at the University of Georgia. We thank Franklin Allen, Jeff Bacidore, Michael Goldstein, Jeff Harris, Ken Kavajecz, Jeff Netter, George Sofianos, Dan Weaver, and seminar participants at the Federal Reserve Bank of Atlanta, the University of Minnesota, Vanderbilt University, the University of Virginia, and the NYSE JB Seminar for helpful comments. We are also grateful to the New York Stock Exchange for providing data. The comments and opinions expressed in this paper are the authors' and do not necessarily reflect those of the directors, members, or officers of the New York Stock Exchange, Inc. The authors are responsible for any errors.

Abstract

We study order flow and liquidity around NYSE trading halts. We find that market and limit order submissions and cancellations increase significantly during trading halts, that a large proportion of the limit order book at the reopen is composed of orders submitted during the halt, and that the market-clearing price at the reopen is a good predictor of future prices. Depth near the quotes is unusually low around trading halts, though specialists and/or floor traders appear to provide additional liquidity at these times. Finally, specialists appear to “spread the quote” prior to imbalance halts to convey information to market participants.

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