This dissertation is motivated by two major factors. First, there have been no direct studies conducted for the relationship between market integrity and market efficiency and the driving forces behind the cross-sectional variations in market quality. Second, a better understanding the relationships among market integrity, market efficiency and other mechanism design factors for securities exchanges will facilitate securities exchanges achieve a satisfactory level of market quality. This dissertation consists of three chapters. In Chapter 1, a review of literature on market manipulation will be given. A series of common securities market manipulation strategies and corresponding market surveillance alerts will be explained and defined. In Chapter 2, we develop a testable hypothesis that market manipulation as proxied by the incidence of ramping alerts would raise transaction cost for completing larger trades. We find ramping alert incidence positively related to effective spreads in 8 of 10 turnover deciles from most liquid to thinnest-trading securities. The magnitude of the increase in effective spreads when ramping manipulation incidence doubles is economically significant, 30 to 40 basis points in many moderate liquidity deciles. This compares with an average effective spread of 72 basis points for index-listed securities in the most efficient electronic markets worldwide. In Chapter 3, In Chapter 3 of this thesis, we test the correlation between the levels of market integrity as proxied by the incidence of ramping alerts and a combination of proxies for factors from the following four potential drivers deciding the market quality across securities exchanges: ??? Securities Markets Trading Regulations ??? Securities Markets Technologies ??? Securities Market Infrastructure ??? Securities Market Participants The model we developed to test the correlation between the proxies for level of market integrity and seven proxies for the four potential drivers were estimated with Ordinary Least Square (OLS) and Two-stage Least Square (2SLS) error structures assumed, respectively to learn the most about the possible endogeneity of spreads and volatility. By performing Hausman-Wu specification tests, we concluded that simultaneity bias in the thickly-traded deciles is not material for the AI-Volatility and AI-Spread equation pairs. Subsequently, we used the PROBIT model to analyse the probability of adopting RTS across the 240 securities exchange deciles and the likelihood proves to be systematically related to four determinants in our sample. Finally we estimate the structural equations to investigate possible cross-equation correlation of the disturbances with either seemingly unrelated regression (SURL) estimation. Our findings are three-fold. Firstly, in the moderately-traded deciles, we find that the presence of a closing auction (CloseAucDum) reduces the incidence of ramping alerts. Trade-based manipulation proves more difficult when a manipulator???s counterparties can use closing auctions to unwind their intraday exposures. The RTS dummy variable is significantly positively related to alert incidence. In the absence of any panel data on the dynamic effects of adopting RTS, what we are observing in cross section is the perceived vulnerability of certain exchanges to manipulation and their consequent adoption of RTS plus the regulatory regimes required to have a salutary effect on market integrity. Second, in the moderately-traded deciles, we find that the closing auctions and more regulations in pursuit of market integrity lower quoted spreads. RTS and a regulation specifically prohibiting ramping indicate in cross-section the perceived likelihood of more ramping. Thirdly, in terms of the probability of the deployment of a real-time surveillance system, the estimations again differ by liquidity decile grouping. In the moderately-traded deciles, higher alert incidence, the presence of DMA, and higher FDI again increase the likelihood of adopting a real-time surveillance system. Our findings have a couple of policy implications for many securities exchanges in terms of market design and market surveillance. First, the exhibited relationship between alert incidence and effective spreads indicates trade-based manipulation has a significant impact on execution costs. Therefore, the prevention of securities market manipulation not only serves the indirect purpose of improving an exchange???s reputation for market integrity but also contributes directly to achieving a more efficient marketplace. Second, our results indicate that some market design changes can enhance the regulatory efforts to prevent securities market manipulations. For example, to prevent manipulators from marking the closing price, some exchanges could choose to adopt a closing auction or a random closing time, which would make manipulation more costly. Nevertheless, no securities exchange can be designed perfectly. Consequently, exchange and broker-level surveillance backed by effective regulatory enforcement is a necessary and pivotal complement to good design choices.

This study examines the impact of FTSE 100 index revisions on the informational efficiency of the underlying stocks. Our study spans the 1986–2009 period. We estimate the speed of price adjustment and price inefficiency from the partial adjustment with noise model of Amihud and Mendelson (1987). We report a significant improvement (no change) in the informational efficiency of the stocks added to (deleted from) the FTSE 100 index. The asymmetric effect of additions and deletions on informational efficiency can be attributed, at least partly, to certain aspects of liquidity and other fundamental characteristics, which improve following additions but do not diminish after deletions. Cross-sectional analysis also indicates that stocks with low pre-addition market quality benefit more from joining the index.

This thesis examines the impact of FTSE 100 index revisions on the various aspects of stock market quality and the cost of equity capital. Our study spans over the period 1986-2009. Our analyses indicate that the index membership enhances all aspects of liquidity, including trading continuity, trading cost and price impact. We also show that the liquidity premium and the cost of equity capital decrease significantly after additions, but do not exhibit any significant change following deletions. The finding that investment opportunities increases after additions, but do not decline following deletions suggests that the benefits of joining an index are likely to be permanent. This evidence is consistent with the investor awareness hypothesis view of Chen et al. (2004, 2006), which suggests that investors' awareness improve when a stock becomes a member of an index, but do not diminish after it is removal from the index. Finally, we report significant changes in the comovement of stock returns with the FTSE 100 index around the revision events. These changes are driven mainly by noise-related factors and partly by fundamental-related factors.

This thesis examines the impact of FTSE 100 index revisions on the various aspects of stock market quality and the cost of equity capital. Our study spans over the period 1986¿2009. Our analyses indicate that the index membership enhances all aspects of liquidity, including trading continuity, trading cost and price impact. We also show that the liquidity premium and the cost of equity capital decrease significantly after additions, but do not exhibit any significant change following deletions. The finding that investment opportunities increases after additions, but do not decline following deletions suggests that the benefits of joining an index are likely to be permanent. This evidence is consistent with the investor awareness hypothesis view of Chen et al. (2004, 2006), which suggests that investors¿ awareness improve when a stock becomes a member of an index, but do not diminish after it is removal from the index. Finally, we report significant changes in the comovement of stock returns with the FTSE 100 index around the revision events. These changes are driven mainly by noise-related factors and partly by fundamental-related factors. / International Fellows Program, USA, (IFP) and American-Mideast-Educational and Training Services, Inc. (AMIDEAST).

Using NASDAQ high frequency trading (HFT) and minute-by-minute Limit Order Book (LOB) data over 120 sample stocks in 10 weeks between 2008-2010, including the week of the Lehman Brothers crisis, we study how trading activities of HFTs, NHFTs (Non-HFTs) and their order placements interact, and affect overall market quality. We capture order placements via the depth (step) and the height (price) dimensions along the LOB. We first document that HFTs are active not only at the top of the LOB, but their orders are placed along the LOB with an average around the 5th step, slightly ahead of NHFTs who on average are close to the 6th step. Generally, both HFTs and NHFTs are more aggressive in order placement with large stocks and hidden orders and HFT orders are further ahead during the crisis week, though price-wise they all back off somewhat with more conservative placements by NHFTs. In market turmoil, whenever HFTs see NHFTs trade among themselves, they become less aggressive in order placement. However, when HFTs trade, other HFT orders become more aggressive by moving ahead. On the contrary, NHFTs generally become more aggressive when other NHFTs supply liquidity in trading, and more conservative when HFTs are the supplier. We find mixed results on the impact of HFTs order placements and trading activities on market quality by different measures, but aggressive orders by HFTs and NHFTs both are related with decreases in short-term market volatility. Our findings highlight the importance of not only studying HFTs and NHFTs activities along the LOB, but also in both depth and height dimensions, instead of only at the market inside quotes.

As science advances, computer technologies are developing rapidly in the past decades. The previous way of traders¡¦ yelling for orders in the house of exchange has been replaced by the Internet and computers. The trading modes of institutional investors are transforming gradually, particularly the radical changes in the US stock market for the past 5 years. The transaction volume from high frequency trading and algorithmic trading is growing dramatically per year, accounting for at least 70% in the U.S. market. And many researchers find these trading methods based on the computer programs good in increasing liquidity, reducing volatility and facilitating price discovery. By using intraday data of Taiwan stock market in 2008 to conduct empirical research, this study intends to analyze the effect of this trend on the TW stock market. Empirical results found that the greater the market capitalization, liquidity, stock volatility are, the higher the proportion of algorithmic trading will be, but which only exists in foreign institutional investors. On the other hand, the increase of the proportion of algorithmic trading can improve liquidity, meanwhile raise the volatility. The conclusion remains unchanged when applied to control the effect of financial tsunami. That means algorithmic trader¡¦s behaviors are not always positive. This result could be related to the special transaction mechanism or lower competition of algorithmic trading in Taiwan. As to trading strategy, the result found that foreign institutional investors focus on momentum strategies, whereas particular dealers act for the sake of index arbitrage or hedge. In summary, the algorithmic trader¡¦s transaction bears positive (liquidity) and negative (volatility) impact on the market at the same time. For individual investors, algorithmic trading¡¦s momentum strategy could appeal to them, but they may not make a profit from these trades, because this strategy could merely want to pull price higher and sell stock or the opposite. About regulators, algorithmic traders¡¦ behavior should be regulated partly; regulatory authorities might also consider adding the circuit mechanism similar to South Koreas¡¦, especially on the program trading. Keywords: algorithmic trading, high frequency trading, intraday, strategy, liquidity, volatility, market quality

Syfte: Högfrekvenshandel har på senare år varit ett omdiskuterat och kontroversiellt ämne. Fenomenet har genomgått omfattande granskning och åsikterna kring dess påverkan på marknaden och dess aktörer går isär. Då tidigare forskning främst genomförts på den amerikanska marknaden är syftet med den här studien att bistå med en djupare insikt kring denna typ av handel och dess avtryck på den svenska finansmarknaden. Metod: För att behandla syftet har en kvalitativ studie av högfrekvenshandel med en deduktiv ansats genomförts. Teori: Studien utgår från Rational Choice Theory, Effektiva marknadshypotesen och tidigare forskning inom ämnet. Med hjälp av det teoretiska ramverket har studien analyserat det empiriska underlaget. Relevanta aspekter har identifierats som kan förklara varför studiens respondenter har ett specifikt förhållningssätt gentemot högfrekvenshandel. Empiri: Studien består av en dokumentstudie och fyra semistrukturerade intervjuer med intressenter på den svenska finansmarknaden. Intervjuerna ämnar identifiera de olika intressenternas förhållningssätt gentemot högfrekvenshandel och dess bakomliggande orsaker. Slutsats: Studien har kommit fram till att förhållningssättet gentemot högfrekvenshandel står i relation till vilken typ av verksamhet som intressenten bedriver. Vidare kan det konstateras att tidigare forskning till stor del går att applicera på den svenska marknaden. / Purpose: In recent years, High Frequency Trading has been a widely debated and controversial topic. The phenomenon has been subject to extensive examination and the opinions regarding its effect on the financial markets are inconsistent. Previous research has foremost been conducted on the American financial market. Thus the purpose of this thesis is to contribute with deeper insight regarding this kind of trading and its impact on the Swedish financial market. Method: To address the purpose of this thesis, a qualitative study with a deductive approach has been conducted. Theory: The thesis emanates from Rational Choice Theory, The Efficient Market Hypothesis and previous research within the field. Using the theoretical framework, the thesis has analyzed the empirical data. Relevant aspects has been identified which can explain why the thesis’ respondents has a specific approach towards High Frequency Trading. Empirics: The thesis consists of a document study and four semi structured interviews with stakeholders on the Swedish financial market. Through these interviews, the thesis aims to identify the stakeholders’ different approaches towards High Frequency Trading and what might cause this particular point of view. Conclusion: The thesis can conclude that the approach towards High Frequency Trading is correlated to the type of operation conducted by the respondent. Furthermore, it can be concluded that previous research in general is applicable on the Swedish financial market.

The tick size regime on systematic internalisers (SIs) was seen as a necessary action to level the playing field between SIs and other trading venues, with the hopes to improve the market composition and market quality in favour of regulated markets. However, the previous literature objects to the view as SIs may have gained the first-mover advantage from their previous tick size exemption. This thesis aims to examine whether the MiFID II tick size regime implementation for SIs on June 26, 2020, alters the market composition and improves the market quality at Nasdaq Stockholm. We consider 45 Swedish stocks with the highest daily average turnover to conduct difference-in-difference regressions. We find that the market quality worsens at Nasdaq Stockholm, while the market composition remains unaffected by the SI tick size regime implementation. The quoted spreads, effective spreads and price impact increase at Nasdaq Stockholm following the SI tick size regime. Impatient traders who trade on information may have rerouted their orders to Nasdaq Stockholm after the event since SIs can no longer offer the avoidance of the price-time priority. Therefore, SIs may have an important role in attracting informed traders who consume rather than supply liquidity. However, the interpretation of the results is conditioned on an inflow of traders from SIs to Nasdaq Stockholm, which we cannot explicitly measure due to the order flow not being adjusted for orders less than the standard market size.

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Magister Scientiae - MSc (Pharmaceutical Chemistry) / The rapid increase in access to new antiretrovirals (ARVs) worldwide and, especially in sub-Saharan Africa, coupled with the well-documented problem of poor quality ARVs in developing countries has underscored the need for quality assessment of these medicines. South Africa has the worst human immunodeficiency virus (HIV) epidemic profile in the world; consequently, it has rolled out the world's largest antiretroviral ARV programme. With increasing market penetration of generic medicine in South Africa and especially ARVs, there is a call for stringent quality control mechanisms following the marketing approval (post-market quality control) of these medications. Unfortunately, evidence suggests that the World Health Organisation (WHO) recommendations for this aspect of quality assurance is not met by most Medicine Regulatory Authorities. In South Africa and many other countries this is attributed to a lack of physical and financial resources to enforce effective post-marketing surveillance (PMS) of all pharmaceuticals available in the country.