When continuous trading becomes continuous: The impact of institutional trading on the continuous trading system of the Warsaw Stock Exchange

This paper examines the impact of a large increase in the number of institutional traders on the performance of a continuous trading system using Polish stock market data. After the Polish pension reform in 1999, the domestic stock market experienced large inflows of money. We theoretically and empirically show that those stocks that are actively traded by pension funds display increases in the share of continuous trading and corresponding liquidity in this system, while no positive effects are found for other stocks. Moreover, we find spill-over effects to the call auction system. (C) 2005 Board of Trustees of the University of Illinois. All rights reserved.