Dissertation Defense Announcement

The Fogelman College of Business and Economics announces the Final Dissertation Defense of

Olena Nikolsko-Rzhevska

for the Degree of Doctor of Philosophy

March 14, 2018 at 12:30 PM in 365, Fogelman College of Business and Economics

Advisor: Thomas McInish

Essays in Finance

ABSTRACT: This dissertation comprises three essays on the microstructure of financial markets. The first essay shows that traders supply phantom liquidity by placing duplicate orders simultaneously on multiple exchanges, with the intent to execute only one. We find that on an average day, half of observed liquidity is duplicate liquidity. The second essay studies order revisions on NASDAQ. We document significant differences between revisions and cancellations/placements. We also find evidence of deleterious effects of revisions on market quality. Our results also show that while traders appear to respond rationally to new information by updating their orders, there exist stable predictable patterns in the behavior of order revisions. In the third essay, we show that a recent increase in short-lived phantom cancellations puts slow traders at a disadvantage. Hence, we develop a framework that allows traders to differentiate between a firm and a phantom quote, which can increase the fill rate of their orders. All three essays contribute to our understanding of the microstructure of financial markets.