Shorting in Broad Daylight: Short Sales and Venue Choice

Using a novel database on venue short sales and market design characteristics, we ask: Where do short sellers exploit their information advantage? Consistent with the prediction of Zhu (2014), we find that exchange short sales comprise a larger proportion of trading and are more informative about fu...

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Veröffentlicht in:Journal of financial and quantitative analysis 2020-11, Vol.55 (7), p.2246-2269
Hauptverfasser: Reed, Adam V., Samadi, Mehrdad, Sokobin, Jonathan S.
Format: Artikel
Sprache:eng
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Zusammenfassung:Using a novel database on venue short sales and market design characteristics, we ask: Where do short sellers exploit their information advantage? Consistent with the prediction of Zhu (2014), we find that exchange short sales comprise a larger proportion of trading and are more informative about future prices than dark-pool short sales, particularly when there is greater competition among short sellers to trade and in the presence of short-lived information. When examining market design characteristics, we find that dark pools offering volume-weighted average price crossing attract more short sales, whereas those offering block trading attract fewer short sales.
ISSN:0022-1090
1756-6916
DOI:10.1017/S0022109019000802