Mark J. Ready

Determinants of Volume in Dark Pool Crossing Networks

I investigate determinants of trading volume for NASDAQ stocks in three of the “dark pools” that cater to institutional traders: Liquidnet, POSIT and Pipeline. I use both panel data regressions and a simulated method of moments approach to investigate institutional traders’ propensity to route orders to these dark pools. The results suggest that dark pool usage is lower for stocks with the lowest spreads per share, which is consistent with trader routing of these stocks to other venues in order to satisfy soft-dollar agreements.

The Deterrence Effect of SEC Enforcement Intensity on Illegal Insider Trading: Evidence from Run-up before News Events

We examine whether enforcement of insider trading laws deters illegal trading. Examining insider trading cases filed by the SEC over the last decade, we find that the price impact on insider trading days is much smaller than the effect documented by Meulbroek (1992) for the 1980s, consistent with increased fear of prosecution. Moreover, we find that pre-announcement run-up in samples of all takeover bids and earnings announcements is negatively related to resource-based enforcement measures, providing evidence that aggressive enforcement deters illegal activity.

The Deterrent Effect of the Securities and Exchange Commission's Enforcement Intensity on Illegal Insider Trading: Evidence from Run-up before News Events

We examine whether public enforcement of US insider-trading laws affects price discovery. Examining insider-trading civil cases filed by the Securities and Exchange Commission (SEC) from 2003 to 2011, we find that the price impact on insider-trading days is much smaller than the effect documented for the 1980s, consistent with increased fear of prosecution. Moreover, we find that preannouncement anticipatory run-up in comprehensive samples of takeover bids and earnings announcements is negatively related to resource-based measures of public enforcement intensity, which suggests that aggressive SEC enforcement deters illegal activity. In addition, we find that quoted bid-ask spreads are negatively related to the SEC’s enforcement intensity, which suggests that greater enforcement improves liquidity. Moreover, the negative and significant relation between run-up and the SEC’s enforcement intensity persists after controlling for quoted spreads.