For his paper “Payment for Order Flow and Market Quality: A Field Experiment”, Prof. Theissen has won the best paper award at the 29th Annual Meeting of the German Finance Association (DGF). The paper is co-authored with Ralf Elsas and Lutz Johanning.
The paper contributes to the regulatory debate about potentially detrimental effects of payment for order flow by presenting results of a field experiment conducted in cooperation with a large German neo-broker. On treatment days, large amounts of retail orders from randomly selected stocks were routed to the main market, Xetra, instead of being executed at a trading venue with payment for order flow. The paper presents various standard measures of liquidity and informational efficiency before, during and after the treatment, both for the treatment and a control group of similar stocks. In a difference-in-differences analysis which allows for clean identification of the causal effect of payment for order flow on stock market quality no significant change in any of the market quality measures is found. The analysis thus does not lend support to the claim that payment for order flow negatively affects market quality in the main market.
The paper can be found here: https://ssrn.com/abstract=4304916