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Centralised order books versus hybrid order books: a paired comparison of trading costs on NSC (Euronext Paris) and SETS (London Stock Exchange)

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  • Gajewski, Jean-François
  • Gresse, Carole
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    Abstract

    This article compares the cost of trading large capitalisation equities on the hybrid order-driven segment of the London Stock Exchange and the centralised electronic order book of Euronext. Using samples of stocks matched according to economic sector, free float capitalisation, and trading volume, our study shows that transaction costs are lower on the centralised order book than on the hybrid order book. The presence of dealers outside the electronic order book favours the frequency of large trades, but is associated with higher execution costs for all other trades and higher adverse selection and inventory costs inside the order book.

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    File URL: http://basepub.dauphine.fr/xmlui/bitstream/123456789/3017/2/gresse_affi%202004.pdf
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    Bibliographic Info

    Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/3017.

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    Date of creation: Dec 2004
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    Handle: RePEc:dau:papers:123456789/3017

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    Related research

    Keywords: Centralised markets; Fragmentation; Hybrid market; Order Books; Spread components; Transaction cost;

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