Do uninformed crossed and internalized trades tap into unexpressed liquidity? The case of Nokia

摘要

Crossed and internalized upstairs trades are analysed in a dataset in which institutional investors can be identified. Earlier findings that upstairs trading is uninformed, taps into unexpressed liquidity, and does not affect market quality are revisited. The permanent price effect of crossings and internalized upstairs trades is significantly lower than that of limit order book trades due to the fact that the least informed institutional trades are routed upstairs. Crossed and internalized trades affect the depth and transaction costs in the limit order book and a greater reliance is placed on the upstairs market when liquidity is low and volatility is high.