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Institutional transaction costs in the Australian equities market

Project Member(s): Putnins, T.

Funding or Partner Organisation: Centre for International Finance and Regulation (CIFR Funding (Centre of Excellence))

Start year: 2015

Summary: This project makes use of unique transaction-level Australian equities regulatory data held by ASIC to better understand the characteristics and efficiency of the Australian equities market. The project quantifies institutional trading costs in the Australian equities market and analyses their trends, how they have been affected by recent changes in the market structure (e.g., regulation of dark trading, and introduction of Chi-X), and how they are impacted by the growth in algorithmic and high-frequency trading. The study uses regulatory data to reconstruct trade `parent┬┐ orders that are executed gradually through a sequence of smaller `child┬┐ orders. Importantly, this allows more accurate measurement of transaction costs by accounting for price impact during the gradual execution of a large order. In addition to contributions to the academic literature, this project has significant policy implications including ways of improving market structure, possible regulation of algorithmic/high-frequency trading, as well as review of recent regulation of dark trading.

FOR Codes: Finance, Finance Services