Competition in Securities Markets: The Impact on Liquidity

Chlistalla, Michael; Lutat, Marco

doi:10.2139/ssrn.1747645

Cited by 10 publications

(12 citation statements)

References 28 publications

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“…They conclude that, due to the presence of a single consolidated tape , sophisticated order routing technologies and prohibition of trade‐throughs , equity markets in the USA are virtually consolidated into a single market with multiple points of entry. Other empirical studies like Hengelbrock and Theissen (), Chlistalla and Lutat (), and Gomber et al . () also observe a positive impact of competition between similarly organized limit order markets on liquidity.…”

Section: Public Policy In Fragmented Marketsmentioning

confidence: 90%

Competition Between Equity Markets: A Review of the Consolidation Versus Fragmentation Debate

Gomber

Sagade

Theissen

et al. 2016

Journal of Economic Surveys

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Technological advances and regulatory initiatives have led to the emergence of a competitive, but fragmented, equity trading landscape in several markets around the world. While these changes have coincided with benefits like reduced transaction costs, advancements in trading technology, and access to a diverse array of execution venues, regulators and market participants have also raised concerns about the welfare implications of innovations like dark pools as well as the resulting increase in execution complexity. Exchanges are often viewed as natural monopolies due to the presence of network externalities and economies of scale. However, heterogeneity in traders' preferences means that no single venue can serve the interests of all investors. Fragmentation of the marketplace can be seen as a direct outcome of this heterogeneity. In this paper, we review the theoretical and empirical literature examining the economic arguments and motivations underlying market fragmentation, the resulting implications for liquidity and price efficiency, and the role for public policy. Beyond the concerns for equity markets, the lessons from this literature are relevant for other asset classes experiencing an increase in competition between trading venues.

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Section: Public Policy In Fragmented Marketsmentioning

confidence: 90%

Competition Between Equity Markets: A Review of the Consolidation Versus Fragmentation Debate

Gomber

Sagade

Theissen

et al. 2016

Journal of Economic Surveys

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“…As a result, traditional market makers might be forced to exit the market, because their profit margins are squeezed with lower bid-ask spreads. Chlistalla and Lutat (2011) study alternative trading venues in European financial markets and how the development of these new trading venues impacts market quality in their native markets. They find that these emerging trading venues attract substantial equity trading volumes and market share.…”

mentioning

confidence: 99%

The determinants of alternative trading venue market share: Global evidence from the introduction of Chi-X

Jarnecic

Liu

2015

Journal of Financial Markets

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“…Since the introduction of MiFID I securities can be traded at several venues located in Europe independently from their homemarket which led to a fragmented market landscape (Fidessa, 2014). Again academia takes market quality into consideration, thereby it was found that fragmentation in Europe leads to an overall improvement of liquidity (Chlistalla and Lutat, 2011;Degryse, Jong, and Kervel, 2011;Foucault and Menkveld, 2008;Gomber, Gsell, and Lutat, 2010). Considering price discovery (how information is processed into prices) Storkenmaier, Wagener, and Weinhardt (2012) conclude that information is asymmetrically processed at different markets.…”

Section: Literature On Economic Value Of Hft and Fragmentationmentioning

confidence: 99%

High-Frequency Trading and its Role in Fragmented Markets

Haferkorn

2017

Journal of Information Technology

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The financial services industry is among the leading industries in IT-spending. Still, little research exists which investigates how IT influences the financial services sector. Against this background, we study how a technology which emerged within the last years affects securities trading: High-Frequency Trading (HFT). Hereby, we focus on HFT and its impact on market efficiency. On the basis of a long-term analysis, we find that HFT decreases price dispersion among two distant markets. Analyzing the introduction of the German HFT Act, we further observe that the price dispersion between two leading trading venues for German blue chip securities increased. We conclude that HFT increases market efficiency in the European market landscape by transmitting information between distant markets.

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Competition in Securities Markets: The Impact on Liquidity

Cited by 10 publications

References 28 publications

Competition Between Equity Markets: A Review of the Consolidation Versus Fragmentation Debate

Competition Between Equity Markets: A Review of the Consolidation Versus Fragmentation Debate

The determinants of alternative trading venue market share: Global evidence from the introduction of Chi-X

High-Frequency Trading and its Role in Fragmented Markets

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