Competition between exchanges: A research agenda

Cantillon, Estelle; Yin, Pai-Ling

doi:10.1016/j.ijindorg.2010.12.001

Cited by 52 publications

(19 citation statements)

References 36 publications

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“…More generally, our paper contributes to the theoretical literature on competition between markets for real or financial assets (e.g., Yavas (1992), Gehrig (1993), Spulber (1996) or Rust and Hall (2006); see Cantillon and Yin (2010b) for a review of the issues specific to this type of competition). This literature also takes trading fees as given (or ignores these fees).…”

mentioning

confidence: 89%

Trading Fees and Efficiency in Limit Order Markets

Colliard¹,

Foucault²

2012

Rev. Financ. Stud.

114

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Common wisdom has it that competition between trading platforms in securities markets benefits investors because it forces platforms to charge smaller fees. We challenge this view by showing that a decrease in trading fees can impair investors' expected welfare in limit order markets. Indeed, a decrease in trading fees can induce investors to strategically post limit orders with a smaller execution probability, in order to earn a greater surplus in case of execution. Hence, a decrease in trading fees yields larger gains from trade when a trade takes place but it can reduce the likelihood of a trade in the first place. The model has testable implications for the effects of a change in trading fees and their breakdown between investors submitting limit orders (makers) and market orders (takers) on limit order fill rates and various measures of bid-ask spreads.

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confidence: 89%

Trading Fees and Efficiency in Limit Order Markets

Colliard¹,

Foucault²

2012

Rev. Financ. Stud.

114

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“…Maybe in the next future a reduction of listing fees might occur as a consequence of a diminishing demand for listing services by domestic companies, as shown by the generalised reduction in the number of quoted enterprises occurred from 2009 up to now. The listing activity plays an essential function in the exchange industry value chain (see Cantillon and Yin ), as it procures the products through which more profitable services like trading, clearing and information can be sold by the exchange. Stock exchanges that want to stay in the equity business would probably soon be forced to reconsider their listing policies, including pricing, in order to widen the set of listed firms and keep safe their own economics.…”

Section: Discussionmentioning

confidence: 99%

Exchanges Competition in Listing Services: Evidence for Italian Companies

Geranio

Lazzari

2014

Economic Notes

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Competition among stock exchanges is growing fast on trading services. Differently, competition for listing securities has so far been minimal, if not absent, especially in Europe. The purpose of this paper is to highlight the monopolistic position that many important and well-renowned exchanges around the world still maintain on offering and pricing of listing services. We first enlighten the content of listing services. We then quantify fees applied by different exchanges to companies according to their size. We consider both initial and annual fees. Our results show that US exchanges are more expensive for medium-sized firms whilst EU markets apply higher fees to the largest companies. Up to now, demutualisation of stock exchanges did not lead to the expected reduction of listing fees. Many exchanges, particularly in the EU, are still taking advantage of their exclusive control position by applying premium price policies to the largest companies in order to cross-subsidise smaller companies.(J.E.L.: G20, G29, N20).

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“…This disutility term reflects the idea of trader heterogeneity that stems from locational differences, such as language, trading access, technology, etc. (Cantillon and Yin, , p. 331f). Cantillon and Yin () provide evidence for the importance of these horizontal differences of trading platforms.…”

Section: The Modelmentioning

confidence: 99%

“…In recent decades, changes in technology and regulation, as well as in market structure resulting from a large number of mergers, have shown the dynamics of the industry. Unfortunately, the interrelation between competition and market structure, and therein the impact of technological developments and regulation, is not well understood (Cantillon and Yin, 2011). We aim to fill this gap by analyzing vertical mergers of exchanges and central securities depositories (CSDs), as well as horizontal mergers of CSDs.…”

Section: Introductionmentioning

confidence: 99%

Organizational Design, Competition, and Financial Exchanges

Juranek

Walz

2019

Scandinavian J Economics

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We investigate the incentives for vertical and horizontal integration in the financial securities service industry. In a model with two exchanges and two central securities depositories (CSDs), we find that decentralized decisions might lead to privately and socially inferior industry equilibria with vertical integration of both CSDs with their respective exchanges. Allowing for horizontal integration of CSDs avoids privately inferior industry equilibria. However, we observe too little horizontal integration from the social perspective. We link our results to recent regulatory and institutional developments such as the emergence of multilateral trading facilities, over‐the‐counter regulation, and financial harmonization.

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Competition between exchanges: A research agenda

Cited by 52 publications

References 36 publications

Trading Fees and Efficiency in Limit Order Markets

Trading Fees and Efficiency in Limit Order Markets

Exchanges Competition in Listing Services: Evidence for Italian Companies

Organizational Design, Competition, and Financial Exchanges

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