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A0888
Title: NASDAQ trading pauses: Pacifiers or amplifiers Authors:  Akos Horvath - University of Vienna (Austria) [presenting]
Nikolaus Hautsch - University of Vienna (Austria)
Abstract: In response to the Flash Crash a new type of circuit breakers, called trading pauses, were introduced on U.S. stock exchanges. Using a unique source of NASDAQ order book data, we take advantage of this quasi-natural-experiment situation and investigate for the first time whether the recently implemented control mechanism fulfills the intended regulatory role of addressing extraordinary volatility. Calculating high-frequency statistics and gathering a control group of pre-regulation extreme pricemovements, we implement a difference-in-differences framework to find that trading pauses enhance price discovery, however, this beneficial effect comes at the cost of higher volatility and bid-ask spread.