What Characterizes Commonality on European NYSE Euronext Markets?

Using a detailed dataset of orders and trades for a sample of stocks listed on the four European markets of NYSE Euronext, we apply principal component analysis and provide evidence on the existence and magnitude of commonality in returns, order flow and liquidity. We show that commonality in order flow mainly comes from foreign members acting for their own account. Proprietary trading is a major driver in trade imbalance and return commonality. Next we provide evidence on commonality in hidden liquidity. In contrast to displayed liquidity, hidden liquidity commonality seems to be stronger for small caps. We also find that commonality in returns, order flow and liquidity is not constant throughout the day. The opening of markets in the US is a key moment where commonality often reaches its maximum level.