Does the bid–ask spread affect trading in exchange operated dark pools? Evidence from a natural experiment

Huu Nhan Duong, Petko S. Kalev, Xiao Jason Tian

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We exploit exogenous reductions in the minimum tick size to examine the effect of the bid–ask spread in the lit market on dark trading activity in the exchange operated dark pool in Japan. Stocks affected by the minimum tick size experience a decline in the share of trading in the exchange operated dark pool. The decrease in the share of dark trading is mostly evident among stocks with a constrained tick size prior to the tick size changes. Overall, our findings imply that reducing the minimum tick size can help lit venues regain market shares over dark venues.

Original languageEnglish
Article number104436
Number of pages18
JournalJournal of Economic Dynamics and Control
Publication statusPublished - Jun 2022


  • Bid–ask spread
  • Dark trading
  • Exchange operated dark pool
  • Japanese market
  • Tick size change

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