We provide average daily statistics for our full sample of 36 stocks for the period February 2011 to June 2013. We provide statistics on market capitalization; transaction price; volume in shares and euros; number of trades; relative bid-ask spreads; displayed depth at the five best levels of the LOB, both in shares and euros; the absolute open-to-close returns; the ratio between the highest and the lowest trade price, and message traffic. Standard deviations are in parentheses.
Metric Cross-sectional average
Market Cap. (/10000) 1151334.09 (1721046.88) Price 17.09 (16.82) Volume (/10000) 551.43 (972.30) Euro Volume (/10000) 4421.48 (7476.87) Trades 2786.76 (2962.78)
Relative bid-ask spread 0.0016
(0.0006)
Depth 58181.41
(91080.94)
Depth (€) 385433.38
(353945.77)
Abs. open-to-close returns 0.0142
(0.0032)
Price high/low 0.0297
(0.0061)
Message Traffic 46396.96
TABLE 2
SIBE-Smart: Liquidity and activity
We evaluate the impact of the introduction of the SIBE-Smart on liquidity and trading activity. In Panel A (short window), we compare a 5-day “pre-Smart” period (April 5, 2012 – April 15, 2012) and a 5-day “post- Smart” period (April 16, 2012 - April 20, 2012). High-frequency data is aggregated into 30-minute intervals. In Panel B (long window), we compare the “pre-Smart” (March 1, 2012 – April 15, 2012) and “post-Smart” periods (April 16, 2012 - May 31, 2012). High-frequency data is aggregated to obtain daily statistics. We present the estimated coefficients from pooled regressions with double-clustered standard errors. Liquidity proxies are: effective spread weighted by trade size (x100) (ESpr); time-weighted quoted depth (Depth); and LOB elasticity (LOBElast). ESpr is an inverse measure while Depth and LOBElast are direct measures of liquidity. Market activity proxies are: the daily volume in shares (Vol) (/104); the daily
volume in euros (Vol€) (/106), and the daily number of trades (Trades). In both panels, the explanatory
variable of interest is the dummy for the post-Smart period (“Post-Smart”). In Panel A, intraday dummies are unreported. In Panel B, control variables include the IBEX-35 volatility (Volat-1), the IBEX-35 daily
return (XRet-1), the first difference of the long-term Government debt yield of Spain (GBYield-1), the first
difference of the sovereign risk of Spain (SovRisk-1), measured as the spread between the long-term
Government debt yield of Spain and Germany, and industrial sector dummies (not reported). All controls are lagged one period.
Panel A: Liquidity and Market activity - Short window
Variable ESpr Depth LOBElast Vol Vol€ Trades
Cons. 0.2155*** 1334.59*** 112.20*** 43.81*** 298.74*** 205.05*** Post-Smart 0.0132*** -76.14*** -12.42*** 6.37*** 34.68*** 18.77***
Obs. 6092 6061 6096 6051 6067 6055
Adj.-R2 0.1013 0.0194 0.0460 0.0158 0.0200 0.0306
F 69.86 50.92 118.20 25.72 29.01 55.03
Panel B: Liquidity and Market activity - Long window
Variable ESpr Depth LOBElast Vol Vol€ Trades
Cons. 0.1022*** 1994.12*** 218.56*** 446.55*** 34.55*** 25.65*** Post-Smart 0.0424*** -447.10*** -36.81*** 68.52 -1.31 2.03 Volat-1 0.0038*** -70.67 -10.03 32.78 1.39 1.28 XRet-1 -0.0005 3.26 0.7362 -28.7640 -1.6388 -1.4805 ΔGBYield-1 0.0034 817.84 74.06 -41.57 -7.10 5.60 ΔSovRisk-1 0.0001 -6.4704 -0.5901 -1.94 -0.09 -0.14 Obs. 2139 2139 2139 2139 2139 2139 Adj.-R2 0.0686 0.0329 0.0573 0.0011 -0.0009 0.0033 F 35.68 14.77 26.05 1.31 0.51 1.98
TABLE 3
SIBE-Smart: Volatility, price efficiency, realized spreads, and price impact We evaluate the impact of the introduction of the SIBE-Smart on volatility and price efficiency (Panel A), and realized spreads and price impacts (Panel B). In the long-window analysis, we compare the “pre-Smart” (March 1, 2012 – April 15, 2012) and “post-Smart” (April 16, 2012 - May 31, 2012) periods. In the short- window analysis, we compare a 5-day “pre-Smart” period (April 5, 2012 – April 15, 2012) and a 5-day “post-Smart” period (April 16, 2012 - April 20, 2012). Realized volatility (RVolat) is the daily standard deviation of 1-minute trade price returns (x100). Efficiency proxies are the autocorrelation of 1-minute trade price returns (Corr) and the pricing error standard deviation (PrErr), estimated using Hasbrouck (1993). Price impact (PrImp) measures the informativeness of trades (adverse selection cost), and the realized spread (RSpr) measures how much of the effective spread is earned by the liquidity provider. Price impact and realized spread are measured over a 5-second horizon after the trade. The explanatory variable of interest is the dummy for the post-Smart period (“Post-Smart”). In the long-window analysis, we use as controls the IBEX-35 volatility (Volat-1), the IBEX-35 daily return (XRet-1), the first difference of the long-
term Government debt yield of Spain (GBYield-1), the first difference of the sovereign risk of Spain
(SovRisk-1), measured as the spread between the long-term Government debt yield of Spain and Germany,
and industrial sector dummies (not reported). All controls are lagged one period. Panel A: Realized volatility and price efficiency
Variable RVolat Corr PrErr RVolat Corr PrErr
Cons. 0.1974*** 16.379*** 0.0367*** 0.0879*** 0.0676*** 0.0226*** Post-Smart 0.0151*** 0.745** 0.0040*** 0.0340*** 0.0136*** 0.0102***
Volat-1 N/A N/A N/A 0.0073*** -0.0013 0.0008***
XRet-1 N/A N/A N/A -0.0031*** -0.0013 -0.0004*
ΔGBYield-1 N/A N/A N/A -0.0256 0.0134 0.0063
ΔSovRisk-1 N/A N/A N/A 0.0001 -0.0003 0.0001***
Obs. 6103 6116 3225 2139 2139 2139
Adj.-R2 0.2057 0.0055 0.0753 0.1751 0.011 0.0712
F 138.85 1.99 44.06 95.47 5.76 35.48
Panel B: Realized spread and price impact
Variable RSpr5 PrImp5 RSpr5 PrImp5
Cons. 0.0581 *** 0.1248 *** 0.0390*** 0.0543***
Post-Smart 0.0044 *** 0.0087 *** 0.0085* 0.0230***
Volat-1 N/A N/A -0.0028** 0.0057***
XRet-1 N/A N/A 0.0001 -0.0007
ΔGBYield-1 N/A N/A 0.0289 -0.0297
ΔSovRisk-1 N/A N/A -0.0001 0.0002
Obs. 6102 6095 2139 2139
Adj.-R2 0.0548 0.0779 0.0979 0.3466
F 26.43 45.23 39.68 111.72
***, **, * indicates statistically significant at the 1%, 5% and 10% level, respectively. Short Window results
Short Window results
Long Window results
TABLE 4
SIBE-Smart: High-speed trading
We evaluate the impact of the introduction of the SIBE-Smart on high-speed trading. In Panel A (short window), we compare a 5-day “pre-Smart” period (April 5, 2012 – April 15, 2012) and a 5-day “post- Smart” period (April 16, 2012 - April 20, 2012). High-frequency data is aggregated into 30-minute intervals. In Panel B (long window), we compare the “pre-Smart” (March 1, 2012 – April 15, 2012) and “post-Smart” periods (April 16, 2012 - May 31, 2012). High-frequency data is aggregated to obtain daily statistics. This table presents the estimated coefficients from pooled regressions with double-clustered standard errors. HFT proxies are: message traffic per volume in shares (MTVSh), message traffic per trade (MTTrd), cancellations per volume in shares (CANVSh), cancellations per trade (CANTrd), quote intensity per volume in shares (QIntVSh), and quote intensity per trade (QIntTrd). Message traffic is the total number LOB updates, which is equivalent to sum all order submissions, revisions, and cancellations. Quote intensity is measured by the number of quote or depth changes at the market quotes. The explanatory variable of interest is the dummy for the post-Smart period (“Post-Smart”). Intraday dummies are not reported. In Panel B, we use as controls the IBEX-35 volatility (Volat-1), the IBEX-35 daily return (XRet- 1), the first difference of the long-term Government debt yield of Spain (GBYield-1), the first difference of
the sovereign risk of Spain (SovRisk-1), measured as the spread between the long-term Government debt
yield of Spain and Germany, and industrial sector dummies (not reported). All controls are lagged one period.
Panel A: High-speed trading metrics - Short window
Variable MTVSh MTTrd CANVSh CANTrd QIntVSh QIntTrd
Cons. 0.0787*** 37.6219*** 0.0324*** 15.16*** 0.0361*** 16.57***
Post-Smart -0.0172*** -5.4778*** -0.0063*** -1.52** -0.0076** -1.90**
Obs. 6070 6068 5978 5963 5990 5980 Adj.-R2 0.0052 0.0067 0.0039 0.0027 0.0037 0.0041 F 32.72 42.15 24.25 16.88 22.79 25.45 Panel B: High-speed trading metrics - Long window
Variable MTVSh MTVTrd CANVSh CANTrd QIntVSh QIntTrd
Cons. 0.0491*** 25.564*** 0.0207*** 10.757*** 0.0223*** 11.4821*** Post-Smart 0.0111 2.235 0.0042 0.976 0.0104* 3.2497** Volat-1 -0.0010 0.416 -0.0005* 0.084 -0.0003 0.3885 XRet-1 0.0015 0.436** 0.0007 0.200** 0.0009 0.3008** ΔGBYield-1 0.0288 4.669 0.0113 1.838 0.0067 -1.2651 ΔSovRisk-1 0.0000 0.047 0.0000 0.023 0.0001 0.0432 Obs. 2139 2139 2131 2131 2131 2131 Adj.-R2 0.0031 0.004 0.0024 0.0029 0.0116 0.0296 F 2.20 2.743 1.8988 2.1747 6.2343 15.0958
TABLE 5
Colocation: Liquidity and market activity
We study the impact of introducing colocation services on liquidity and trading activity. In Panel A (short window), we compare a 5-day “pre-colocation” period (November 5-11, 2012) and a 5-day “post- colocation” period (November 12-16, 2012). High-frequency data is aggregated into 30-minute intervals. In Panel B (long window), we compare three periods: the “Pre-Colo&Ban” period spans from July 23, 2013 to November 11, 2012, a time with banned short selling and no colocation; the “Colo&Ban” period spans from November 12, 2012 to January 31, 2013, a time with banned short selling and colocation, and the “Colo&Post-Ban” period corresponds to February 1, 2013 – June 31, 2013, a time with no ban but with colocation. The control period is April 16, 2012 – July 22, 2012, the time between the introduction of the SIBE-Smart platform and the ban imposition. In Panel B, high-frequency data is aggregated into daily statistics. We present the estimated coefficients from pooled regressions with double-clustered standard errors. Liquidity proxies are: effective spread weighted by trade size (x100) (ESpr); time-weighted quoted depth (Depth); and LOB elasticity (LOBElast). ESpr is an inverse measure while Depth and LOBElast are direct measures of liquidity. Market activity proxies are: the daily volume in shares (Vol) (/104); the daily
volume in euros (Vol€) (/106), and the daily number of trades (Trades). In Panel A, the explanatory variable
of interest is the dummy for the post-colocation period (“Post-Colo”). Intraday dummies are unreported. In Panel B, the variables of interest are the dummies for the Pre-Colo&Ban, Colo&Ban, and Colo&Post-Ban periods. We report F-tests comparing the estimated coefficients. Control variables include the IBEX-35 volatility (Volat-1), the IBEX-35 daily return (XRet-1), the first difference of the long-term Government debt
yield of Spain (GBYield-1), the first difference of the sovereign risk of Spain (SovRisk-1), measured as
the spread between the long-term Government debt yield of Spain and Germany, and industrial sector dummies (not reported). All controls are lagged one period.
Panel A: Short window
Variable ESpr Depth LOBElast Vol Vol€ Trades
Cons. 0.2604*** 809.13*** 90.95*** 19.44*** 116.39*** 84.87***
Post-Colo 0.0010 -21.99 -6.7141*** 3.28*** 0.0164 0.8856
Obs. 6037 6094 6082 6114 6115 6110 Adj.-R2 0.0477 0.0290 0.0477 0.0226 0.0312 0.0424 F 29.75 29.26 60.22 19.48 29.94 44.74 Panel B: Long window
Variable ESpr Depth LOBElast Vol Vol€ Trades
Cons. 0.1858*** 731.087*** 113.895*** 72.883 9.452*** 13.373*** Pre-Colo&Ban [1] 0.0529*** 51.049 -20.680*** -199.413*** -11.026*** -11.570*** Colo&Ban [2] 0.0269*** 719.668** 18.817*** -40.290 -10.508** -11.135*** Colo&Post-Ban [3] -0.0170* 542.303** 41.465*** 17.259 -4.227* -47.365*** Volat-1 0.0095*** -36.107 -5.694*** 35.405*** 1.663*** 1.655*** XRet-1 0.0003 44.885** 1.087*** -1.832 -0.036 -0.253 ΔGBYield-1 0.0072 -180.819 11.633** -57.451 -5.199*** -1.950 ΔSovRisk-1 0.0021 -0.3348 -0.0579** 0.1549 0.0131 -0.019 Obs. 10514 10514 10514 10514 10514 10514 Adj.-R2 0.2451 0.0595 0.2248 0.1942 0.1452 0.1690 F 287.499 83.83 351.61 173.028 197.656 198.592 Coefficient tests [2]-[1] -0.0260 668.6195 39.4964 159.1226 0.5179 0.4353 F 6.7800 4.3000 33.2000 0.7800 0.1200 0.1800 p-value 0.0092 0.0382 0.0000 0.3782 0.7289 0.6755 [3]-[2] -0.0439 -177.3650 22.6481 57.5493 6.2804 -36.2302 F 45.2400 0.5200 34.1500 1.3700 7.8600 17.4900 p-value 0.0000 0.4699 0.0000 0.2413 0.0051 0.0000
TABLE 6
Colocation: Volatility, price efficiency, realized spreads, and price impacts We study the impact of introducing colocation services on volatility, price efficiency, realized spread, and price impact. In Panel A (short window), we compare a 5-day “pre-colocation” period (November 5-11, 2012) and a 5-day “post-colocation” period (November 12-16, 2012). High-frequency data is aggregated into 30-minute intervals. In Panel B (long window), we compare three periods: the “Pre-Colo&Ban” period spans from July 23, 2013 to November 11, 2012, a time with banned short selling and no colocation; the “Colo&Ban” period spans from November 12, 2012 to January 31, 2013, a time with banned short selling and colocation, and the “Colo&Post-Ban” period corresponds to February 1, 2013 – June 31, 2013, a time with no ban but with colocation. The control period is April 16, 2012 – July 22, 2012, the time between the introduction of the SIBE-Smart and the ban imposition. In Panel B, high-frequency data is aggregated into daily statistics. We present the estimated coefficients from pooled regressions with double-clustered standard errors. Realized volatility (RVolat) is the daily standard deviation of 1-minute trade price returns (x100). Efficiency proxies are the autocorrelation of 1-minute trade price returns (Corr) and the pricing error standard deviation (PrErr), estimated using Hasbrouck (1993). Price impact (PrImp) measures adverse selection cost, and the realized spread (RSpr) measures how much of the effective spread is earned by the liquidity provider. In Panel A, the explanatory variable of interest is the post-colocation period dummy (“Post-Colo”). Intraday dummies are unreported. In Panel B, the explanatory variables of interest are the Pre-Colo&Ban, Colo&Ban, and Colo&Post-Ban dummies. We report F-tests comparing the estimated coefficients. Control variables include the IBEX-35 volatility (Volat-1), the IBEX-35 daily return
(XRet-1), the first difference of the long-term Government debt yield of Spain (GBYield-1), the first
difference of the sovereign risk of Spain (SovRisk-1), measured as the spread between the long-term
Government debt yield of Spain and Germany, and industrial sector dummies (not reported). All controls are lagged one period.
Panel A: Short window
Variable RVolat Corr PrErr RSpr5 PrImp5
Cons. 0.1560*** 15.04*** 0.0430*** 0.0827*** 0.1222***
Post-Colo 0.0072*** 0.216 0.0012 -0.0072*** 0.0060***
Obs. 6093 5998 2820 5993 6058 Adj.-R2 0.1143 0.0051 0.0286 0.0127 0.0529 F 58.90 1.80 14.57 6.10 26.70 Panel B: Long window
Variable RVolat Corr PrErr RSpr5 PrImp5
Cons. 0.1218*** 0.0688*** 0.3482** 0.044*** 0.1024*** Pre-Colo&Ban [1] -0.0021 0.0005 0.1937* 0.0377*** 0.0008 Colo&Ban [2] -0.0203*** 0.0119*** -0.0007 0.0354*** -0.0205*** Colo&Post-Ban [3] -0.0288*** -0.0012 -0.0153 0.0050 -0.0214*** Volat-1 0.0124*** 0.0020*** -0.0442* 0.0010 0.0066*** XRet-1 -0.0008 0.0001 0.0157 0.0011** -0.0009* ΔGBYield-1 -0.0144 -0.0075 0.3243 -0.0023 0.0044 ΔSovRisk-1 0.0002 0.0001 -0.0009 0.0020 0.0014 Obs. 10514 10514 10514 10514 10514 Adj.-R2 0.2988 0.0094 0.0012 0.2548 0.275 F 343.42 8.78 5.94 350.38 300.06 Coefficient tests [2]-[1] -0.0182 0.0114 -0.1944 -0.0023 -0.0213 F 15.2600 17.0600 2.0200 0.2400 38.8600 p-value 0.0001 0.0000 0.1554 0.6221 0.0000 [3]-[2] -0.0085 -0.0131 -0.0146 -0.0304 -0.0009 F 7.8200 16.7900 0.0400 88.4700 0.1300 p-value 0.0052 0.0000 0.8488 0.0000 0.7208
TABLE 7
Colocation: High-speed trading
We study the impact of introducing colocation services on high-speed trading. In Panel A (short window), we compare a 5-day “pre-colocation” period (November 5-11, 2012) and a 5-day “post-colocation” period (November 12-16, 2012). High-frequency data is aggregated into 30-minute intervals. In Panel B (long window), we compare three periods: the “Pre-Colo&Ban” period spans from July 23, 2013 to November 11, 2012, a time with banned short selling and no colocation; the “Colo&Ban” period spans from November 12, 2012 to January 31, 2013, a time with banned short selling and colocation, and the “Colo&Post-Ban” period corresponds to February 1, 2013 – June 31, 2013, a time with no ban but with colocation. The control period is April 16, 2012 – July 22, 2012, the time between the introduction of the SIBE-Smart and the ban imposition. High-frequency data is aggregated into daily statistics. We present the estimated coefficients from pooled regressions with double-clustered standard errors. HFT proxies are: message traffic per volume in shares (MTVSh), message traffic per trade (MTTrd), cancellations per volume in shares (CANVSh), cancellations per trade (CANTrd), quote intensity per volume in shares (QIntVSh), and quote intensity per trade (QIntTrd). Message traffic is the total number LOB updates, the sum of all order submissions, revisions, and cancellations. Quote intensity is measured by the number of quote or depth changes at the market quotes. In Panel A, the explanatory variable of interest is the post-colocation dummy (“Post-Colo”). Intraday dummies are unreported. In Panel B, the explanatory variables of interest are the Pre-Colo&Ban, Colo&Ban, and Colo&Post-Ban dummies. We report F-tests comparing the estimated coefficients. As controls, we use the IBEX-35 volatility (Volat-1), the IBEX-35 daily return (XRet-1), the first difference of
the long-term Government debt yield of Spain (GBYield-1), the first difference of the sovereign risk of
Spain (SovRisk-1), measured as the spread between the long-term Government debt yield of Spain and
Germany, and industrial sector dummies (not reported). All controls are lagged one period.
Panel A: Short window
Variable MTVSh MTTrd CANVSh CANTrd QIntVSh QIntTrd
Cons. 0.0575*** 26.3340*** 0.0212*** 9.78*** 0.0283*** 12.42***
Post-Event 0.0018 1.7006 0.0005 0.49 0.0012 1.16*
Obs. 6022 6054 6028 6051 6016 6039 Adj.-R2 -0.0001 0.0004 -0.0001 0.0002 -0.0001 0.0011
F 0.43 3.45 0.23 2.05 0.66 7.79
Panel B: Long window
Variable MTVSh MTTrd CANVSh CANTrd QIntVSh QIntTrd
Cons. 0.0923*** 37.2125*** 0.0372*** 14.9688*** 19.6408*** 0.0515*** Pre-Colo&Ban [1] -0.0182** -7.2202*** -0.0092** -3.7980*** -3.7408*** -0.0099* Colo&Ban [2] -0.0322*** -11.9315*** -0.0146*** -5.6536*** -7.9533*** -0.0208*** Colo&Post-Ban [3] -0.0111 -4.0449 -0.0049 -1.7641 -5.9865*** -0.0129** Volat-1 0.0006 0.1646 0.0003 0.0855 0.2072 0.0005 XRet-1 -0.0008* -0.4090** -0.0004** -0.1745** -0.2119* -0.0004* ΔGBYield-1 0.0063 3.9057 0.0029 1.7236 1.1283 0.0011 ΔSovRisk-1 0.0001 0.0001 0.0001 -0.0020 0.0041 0.0001 Obs. 10514 10514 10514 10514 10514 10514 Adj.-R2 0.1550 0.0787 0.1495 0.0820 0.1159 0.1393 F 195.03 99.94 173.27 99.30 107.81 175.45 Coefficient tests [2]-[1] -0.0140 -4.7113 -0.0054 -1.8556 -4.2125 -0.0109 F 9.3600 6.2600 9.4000 5.9200 12.1300 13.9800 p-value 0.0022 0.0123 0.0022 0.0150 0.0005 0.0002 [3]-[2] 0.0211 7.8866 0.0097 3.8895 1.9668 0.0079 F 17.5500 6.2200 17.6500 6.8100 7.1700 15.8400 p-value 0.0000 0.0127 0.0000 0.0091 0.0074 0.0001
TABLE 8