Lifting the veil: An analysis of pre-trade transparency at the NYSE

for helpful comments. This research began while Boehmer was a Director of Research and Saar was a Visiting Research Economist at the New York Stock Exchange. The opinions expressed in this paper do not necessarily reflect those of the members or directors of the NYSE. Lifting the Veil: An Analysis of Pre-Trade Transparency at the NYSE This paper investigates an important feature of market design: pre-trade transparency, defined as the availability of information about pending trading interest in the market. We look at how NYSE’s introduction of OpenBook, which enables traders off the exchange floor to observe depth in the limit order book in real time, affects the trading strategies of investors and specialists, informational efficiency, and liquidity. We find that traders attempt to manage the exposure of their limit orders: the cancellation rate increases, time-to-cancellation declines, and smaller orders are submitted. Traders seem to prefer to manage the trading process themselves using the new OpenBook information rather than delegate the task to floor brokers. We show that specialists ’ participation rate in trading declines and th