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Article
Trading System Upgrades and Short-Sale Bans: Uncoupling the Effects of Technology and Regulation
Journal of Empirical Finance (2017)
  • Bidisha Chakrabarty, Saint Louis University
  • Pamela Moulton, Cornell University
  • Roberto Pascual, University of the Balearic Islands
Abstract
We examine the market quality effects of technology upgrades juxtaposed with short-sale bans. Between 2011 and 2013, the Spanish Stock Exchange introduced a smart trading platform (SIBE-Smart) and colocation to facilitate high-speed trading, and they also imposed two short-sale bans. We find that the SIBE-Smart introduction, which occurs between the two short-sale bans, leads to reduced market quality. The introduction of colocation, which occurs during the second short-sale ban, improves market liquidity although it does not attract additional high-speed trading. Our results highlight how the effects of latency-reducing infrastructure improvements depend on, and differ across, different regulatory regimes.
Keywords
  • technological upgrades,
  • SIBE-Smart,
  • colocation,
  • short-sale ban,
  • high-speed trading,
  • equity market liquidity,
  • JEL: G14,
  • JEL: L10
Publication Date
September, 2017
DOI
10.1016/j.jempfin.2017.05.004
Publisher Statement
Required Publisher Statement
© Elsevier. Final version published as: Chakrabarty, B., Moulton, P. C., & Pascual, R. (2017). Trading system upgrades and short-sale bans: Uncoupling the effects of technology and regulation. Journal of Empirical Finance, 43, 74-90. doi:10.1016/j.jempfin.2017.05.004
Reprinted with permission. All rights reserved.
Citation Information
Chakrabarty, B., Moulton, P. C., & Pascual, R. (2016). Trading system upgrades and short-sale bans: Uncoupling the effects of technology and regulation [Electronic version]. Retrieved [insert date], from Cornell University, School of Hotel Administration site: https://works.bepress.com/pamela_moulton/
Creative Commons license
Creative Commons License
This work is licensed under a Creative Commons CC_BY-NC-ND International License.