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The implications of a price anchoring effect at the upstairs market of the London Stock Exchange

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Standard Standard

The implications of a price anchoring effect at the upstairs market of the London Stock Exchange. / Verousis, Thanos; ap Gwilym, Owai.
In: International Review of Financial Analysis, Vol. 32, 03.2014, p. 37-46.

Research output: Contribution to journal › Article › peer-review

HarvardHarvard

Verousis, T & ap Gwilym, O 2014, 'The implications of a price anchoring effect at the upstairs market of the London Stock Exchange', International Review of Financial Analysis, vol. 32, pp. 37-46. https://doi.org/10.1016/j.irfa.2013.12.001

APA

Verousis, T., & ap Gwilym, O. (2014). The implications of a price anchoring effect at the upstairs market of the London Stock Exchange. International Review of Financial Analysis, 32, 37-46. https://doi.org/10.1016/j.irfa.2013.12.001

CBE

Verousis T, ap Gwilym O. 2014. The implications of a price anchoring effect at the upstairs market of the London Stock Exchange. International Review of Financial Analysis. 32:37-46. https://doi.org/10.1016/j.irfa.2013.12.001

MLA

Verousis, Thanos and Owai ap Gwilym. "The implications of a price anchoring effect at the upstairs market of the London Stock Exchange". International Review of Financial Analysis. 2014, 32. 37-46. https://doi.org/10.1016/j.irfa.2013.12.001

VancouverVancouver

Verousis T, ap Gwilym O. The implications of a price anchoring effect at the upstairs market of the London Stock Exchange. International Review of Financial Analysis. 2014 Mar;32:37-46. Epub 2013 Dec 12. doi: 10.1016/j.irfa.2013.12.001

Author

Verousis, Thanos ; ap Gwilym, Owai. / The implications of a price anchoring effect at the upstairs market of the London Stock Exchange. In: International Review of Financial Analysis. 2014 ; Vol. 32. pp. 37-46.

RIS

TY - JOUR

T1 - The implications of a price anchoring effect at the upstairs market of the London Stock Exchange

AU - Verousis, Thanos

AU - ap Gwilym, Owai

PY - 2014/3

Y1 - 2014/3

N2 - This paper studies the upstairs market of the Stock Exchange Trading System (SETS) of the London Stock Exchange (LSE). We hypothesise that the implicit interaction between the upstairs and the downstairs markets at the LSE alters the pricing mechanism at the upstairs market. We show that market makers employ “cluster undercutting” practices in the upstairs market, which are based on a notional minimum price increment and resemble an anchoring-and-adjustment effect. In particular, we report that liquidity providers consistently buy just below the implicit minimum price increment and consistently sell just above it. This finding is strongly related to stock-price momentum and periods of increased trade intensity. Overall, this effect has only a weak connection to differences in informed trading and is mostly related to the notional price barriers and resistance levels introduced by the minimum tick size of the order book.

AB - This paper studies the upstairs market of the Stock Exchange Trading System (SETS) of the London Stock Exchange (LSE). We hypothesise that the implicit interaction between the upstairs and the downstairs markets at the LSE alters the pricing mechanism at the upstairs market. We show that market makers employ “cluster undercutting” practices in the upstairs market, which are based on a notional minimum price increment and resemble an anchoring-and-adjustment effect. In particular, we report that liquidity providers consistently buy just below the implicit minimum price increment and consistently sell just above it. This finding is strongly related to stock-price momentum and periods of increased trade intensity. Overall, this effect has only a weak connection to differences in informed trading and is mostly related to the notional price barriers and resistance levels introduced by the minimum tick size of the order book.

U2 - 10.1016/j.irfa.2013.12.001

DO - 10.1016/j.irfa.2013.12.001

M3 - Article

VL - 32

SP - 37

EP - 46

JO - International Review of Financial Analysis

JF - International Review of Financial Analysis

SN - 1057-5219

ER -