Competition for Order Flow and Smart Order Routing Systems
AbstractWe study the rivalry between Euronext and the London Stock Exchange (LSE) in the Dutch stock market to test hypotheses about the effect of market fragmentation. As predicted by our theory, the consolidated limit order book is deeper after entry of the LSE. Moreover, cross-sectionally, we find that a higher trade-through rate in the entrant market coincides with less liquidity supply in this market. These findings imply that (i) fragmentation of order flow can enhance liquidity supply and (ii) protecting limit orders against trade-throughs is important. Copyright 2008 by The American Finance Association.
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Bibliographic InfoArticle provided by American Finance Association in its journal The Journal of Finance.
Volume (Year): 63 (2008)
Issue (Month): 1 (02)
Other versions of this item:
- Foucault, Thierry & Menkveld, Albert J., 2006. "Competition for Order Flow and Smart Order Routing Systems," CEPR Discussion Papers 5523, C.E.P.R. Discussion Papers.
- Foucault, Thierry & Menkveld, Albert, 2006. "Competition for order flow and smart order routing systems," Les Cahiers de Recherche 831, HEC Paris.
- F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F18 - International Economics - - Trade - - - Trade and Environment
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