FinTech, Fractional Trading, and Order Book Dynamics: A Study of US Equities Markets
This study investigates how the rise of commission-free FinTech platforms and the introduction of fractional trading (FT) have altered trading behavior and order book dynamics in the NASDAQ equity market. Leveraging high-frequency ITCH data from highly capitalized stocks—AAPL, AMZN, GOOG, and TSLA—w...
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| Format: | Article |
| Language: | English |
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MDPI AG
2025-04-01
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| Series: | FinTech |
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| Online Access: | https://www.mdpi.com/2674-1032/4/2/16 |
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| author | Janhavi Shankar Tripathi Erick W. Rengifo |
| author_facet | Janhavi Shankar Tripathi Erick W. Rengifo |
| author_sort | Janhavi Shankar Tripathi |
| collection | DOAJ |
| description | This study investigates how the rise of commission-free FinTech platforms and the introduction of fractional trading (FT) have altered trading behavior and order book dynamics in the NASDAQ equity market. Leveraging high-frequency ITCH data from highly capitalized stocks—AAPL, AMZN, GOOG, and TSLA—we analyze market microstructure changes surrounding the implementation of FT. Our empirical findings show a statistically significant increase in price levels, average tick sizes, and price volatility in the post-FinTech-FT period, alongside elevated price impact factors (PIFs), indicating steeper and less liquid limit order books. These shifts reflect greater participation by non-professional investors with limited order placement precision, contributing to noisier price discovery and heightened intraday risk. The altered liquidity landscape and increased volatility raise important questions about the resilience and informational efficiency of modern equity markets under democratized access. Our findings contribute to the growing literature on retail trading and provide actionable insights for market regulators and exchanges evaluating the design and oversight of evolving trading mechanisms. |
| format | Article |
| id | doaj-art-77d64176f7754f4f882b2c17946fbc79 |
| institution | Kabale University |
| issn | 2674-1032 |
| language | English |
| publishDate | 2025-04-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | FinTech |
| spelling | doaj-art-77d64176f7754f4f882b2c17946fbc792025-08-20T03:27:18ZengMDPI AGFinTech2674-10322025-04-01421610.3390/fintech4020016FinTech, Fractional Trading, and Order Book Dynamics: A Study of US Equities MarketsJanhavi Shankar Tripathi0Erick W. Rengifo1School of Business, St. Bonaventure University, St. Bonaventure, NY 14778, USADepartment of Economics, and the Center for International Policy Studies, Fordham University, New York, NY 10458, USAThis study investigates how the rise of commission-free FinTech platforms and the introduction of fractional trading (FT) have altered trading behavior and order book dynamics in the NASDAQ equity market. Leveraging high-frequency ITCH data from highly capitalized stocks—AAPL, AMZN, GOOG, and TSLA—we analyze market microstructure changes surrounding the implementation of FT. Our empirical findings show a statistically significant increase in price levels, average tick sizes, and price volatility in the post-FinTech-FT period, alongside elevated price impact factors (PIFs), indicating steeper and less liquid limit order books. These shifts reflect greater participation by non-professional investors with limited order placement precision, contributing to noisier price discovery and heightened intraday risk. The altered liquidity landscape and increased volatility raise important questions about the resilience and informational efficiency of modern equity markets under democratized access. Our findings contribute to the growing literature on retail trading and provide actionable insights for market regulators and exchanges evaluating the design and oversight of evolving trading mechanisms.https://www.mdpi.com/2674-1032/4/2/16fintechfractional tradingorder book dynamicsinvestor behaviorrisk aversion |
| spellingShingle | Janhavi Shankar Tripathi Erick W. Rengifo FinTech, Fractional Trading, and Order Book Dynamics: A Study of US Equities Markets FinTech fintech fractional trading order book dynamics investor behavior risk aversion |
| title | FinTech, Fractional Trading, and Order Book Dynamics: A Study of US Equities Markets |
| title_full | FinTech, Fractional Trading, and Order Book Dynamics: A Study of US Equities Markets |
| title_fullStr | FinTech, Fractional Trading, and Order Book Dynamics: A Study of US Equities Markets |
| title_full_unstemmed | FinTech, Fractional Trading, and Order Book Dynamics: A Study of US Equities Markets |
| title_short | FinTech, Fractional Trading, and Order Book Dynamics: A Study of US Equities Markets |
| title_sort | fintech fractional trading and order book dynamics a study of us equities markets |
| topic | fintech fractional trading order book dynamics investor behavior risk aversion |
| url | https://www.mdpi.com/2674-1032/4/2/16 |
| work_keys_str_mv | AT janhavishankartripathi fintechfractionaltradingandorderbookdynamicsastudyofusequitiesmarkets AT erickwrengifo fintechfractionaltradingandorderbookdynamicsastudyofusequitiesmarkets |