arbiter
JournalsAccount

Do designated market makers provide liquidity during downward extreme price movements?

Mario Bellia et al.

Journal of Financial Markets2025https://doi.org/10.1016/j.finmar.2025.100988article
AJG 3ABDC A*
Weight
0.41

Abstract

We study the trading activity of designated market makers (DMMs) in electronic markets using a unique dataset with audit-trail information on trader classification. DMMs may either adhere to their market-making agreements and offer immediacy during periods of heavy selling pressure, or they might lean-with-the-wind to profit from private information. We test these competing theories during extreme (downward) price movements, which we detect using a novel methodology. We show that DMMs provide liquidity when the selling pressure is concentrated on a single stock, but consume liquidity (leaving liquidity provision to slower traders) when several stocks are affected. • We study designated market makers liquidity provision in Nyse-Euronext. • We show that they provide liquidity in case of extreme selling pressure concentrated on single stocks. • They instead consume liquidity when selling pressure is systematic. • We use a new identification method for extreme price movements, which crucially allows to assess the above results.

2 citations

Open via your library →

Cite this paper

https://doi.org/https://doi.org/10.1016/j.finmar.2025.100988

Or copy a formatted citation

@article{mario2025,
  title        = {{Do designated market makers provide liquidity during downward extreme price movements?}},
  author       = {Mario Bellia et al.},
  journal      = {Journal of Financial Markets},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1016/j.finmar.2025.100988},
}

Paste directly into BibTeX, Zotero, or your reference manager.

Flag this paper

Do designated market makers provide liquidity during downward extreme price movements?

Flags are reviewed by the Arbiter methodology team within 5 business days.

Evidence weight

0.41

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.25 × 0.4 = 0.10
M · momentum0.55 × 0.15 = 0.08
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.