The document examines how revealing information about the limit-order book affects trading strategies, price evolution, and liquidity. It analyzes data from before and after a change in policy that increased pre-trade transparency by making more order book information available. The analysis looks at how trading strategies, price efficiency, and liquidity changed as a result. Statistical tests like median comparisons and regressions are used to analyze the effects of the increased transparency. The findings suggest that while investors did not significantly change their strategies, greater pre-trade transparency allowed for more complex trading strategies and improved liquidity.

1. Presented By-
Yasha Singh
4113007007
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2.  Examine how publicly revealing information about
the limit-order book affects investors trading
strategies , the way prices evolve in response to order
flow, and the resulting state of liquidity in the
market.
 Investigation of pre-trade transparency, defined as
the availability of information about quotes and
trading interest.
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3.  Data used is a pre-event data (i.e. 2 weeks before
24th Jan’2002) and post-event data.
 Trading strategies :
• First look at how market participants change their trading
strategies as a result of the event.
• Examine how these strategies affect the informational efficiency
of prices by looking at the deviations of transaction prices from
the efficient price and the autocorrelation of quote-midpoint
return.
• Change in the liquidity.
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4.  For doing this stock specific mean is calculated for
all variables.
 Median across stocks of pair wise differences
between each post-event period and the pre-event
period.
 p-value is calculated using wilcoxon test against two
side hypothesis that the median is equal to zero.
 Semi parametric Cox regression is done .
• Logarithm of the hazard rate(rate of occurrence of failures) is
modeled as a linear function of an intercept.
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5.  Information and prices:
• The first test is based on the variance decomposition procedure.
• Vector auto regression model is used to separate the efficient
price from the deviation introduced by trading process(e.g.
short-term fluctuations in the prices due to inventory control or
order imbalances in the market).
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6.  Investors do not change their strategies in response
to the change in the market design.
 Open book enables traders to implement more
complex strategies.
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7.  Pre-trade transparency is a win-win situation.
 Greater transparency would improve liquidity.
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