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The total cost of trading Belgian shares: Brussels versus London

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Author Info

  • Degryse, H.A.

    (Tilburg University, Center for Economic Research)

Abstract

Since 1990, London’s SEAQ International attracts considerable trading volume in Belgian equities. This paper uses transaction, quotation and limit order book data to investigate competition between the Brussels CATS market and SEAQ International. It focuses in more detail on the liquidity (indirect costs) measured by the quoted and effective bid-ask spread. CATS outweighs SEAQI for both measures. The effective spread is substantially smaller than the quoted spread. The CATS effective spread shows a U-shaped form. This is in line with the different market micro-structure models. Total trading costs on CATS are lower (higher) for small (large) trade sizes.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 1996-105.

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Date of creation: 1996
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Handle: RePEc:dgr:kubcen:1996105

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Related research

Keywords: international financial markets; shares; costs;

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References

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  1. Jong, F.C.J.M. de & Nijman, T.E. & Roell, A.A., 1993. "A comparison of the cost of trading French shares on the Paris Bourse and on SEAQ International," Discussion Paper 1993-29, Tilburg University, Center for Economic Research.
  2. Hausman, J.A. & Lo, A.W. & MacKinlay, A.C., 1991. "An Ordered Probit Analysis of Transaction Stock Prices," Weiss Center Working Papers 26-91, Wharton School - Weiss Center for International Financial Research.
  3. Madhavan, Ananth, 1992. " Trading Mechanisms in Securities Markets," Journal of Finance, American Finance Association, vol. 47(2), pages 607-41, June.
  4. Madhavan, A. & Smidt, S., 1991. "A Baysian Model of Intraday Specialist Pricing," Weiss Center Working Papers 2-91, Wharton School - Weiss Center for International Financial Research.
  5. Degryse, Hans, 1999. "The total cost of trading Belgian shares: Brussels versus London," Journal of Banking & Finance, Elsevier, vol. 23(9), pages 1331-1355, September.
  6. Gresse, Carole & Jacquillat, Bertrand & Gillet, Roland, 1998. "Revisiting the Competition between the International Equity Market of the London Stock Exchange and the Brussels Stock Exchange," Economics Papers from University Paris Dauphine 123456789/6676, Paris Dauphine University.
  7. Pagano, Marco & Röell, Ailsa A, 1991. "Dually-Traded Italian Equities: London vs. Milan," CEPR Discussion Papers 564, C.E.P.R. Discussion Papers.
  8. Bertrand Jacquillat & Carole Gresse, 1998. "The Diversion of Order Flow on French Stocks from CAC to SEAQ International: a Field Study," European Financial Management, European Financial Management Association, vol. 4(2), pages 121-142.
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  11. Anderson, Ronald W. & Tychon, Pierre, 1993. "Competition Among European Financial Markets : The Case of Cross-Listed Belgian Equities," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1993014, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  12. Gresse, Carole & Jacquillat, Bertrand, 1998. "The Diversion of Order Flow on French Stocks from CAC to SEAQ International : A field Study," Economics Papers from University Paris Dauphine 123456789/6670, Paris Dauphine University.
  13. Pagano, Marco & Roell, Ailsa, 1996. " Transparency and Liquidity: A Comparison of Auction and Dealer Markets with Informed Trading," Journal of Finance, American Finance Association, vol. 51(2), pages 579-611, June.
  14. Glosten, Lawrence R. & Harris, Lawrence E., 1988. "Estimating the components of the bid/ask spread," Journal of Financial Economics, Elsevier, vol. 21(1), pages 123-142, May.
  15. Biais, Bruno, 1993. " Price Information and Equilibrium Liquidity in Fragmented and Centralized Markets," Journal of Finance, American Finance Association, vol. 48(1), pages 157-85, March.
  16. Vincent Reinhart, 1992. "An analysis of potential Treasury auction techniques," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jun, pages 403-413.
  17. Klemperer, Paul & Padilla, Atilano Jorge, 1993. "Do Firms' Product Lines Include Too Many Varieties, and Do Shops Open Too Many Days?," CEPR Discussion Papers 835, C.E.P.R. Discussion Papers.
  18. Biais, Bruno & Hillion, Pierre & Spatt, Chester, 1995. " An Empirical Analysis of the Limit Order Book and the Order Flow in the Paris Bourse," Journal of Finance, American Finance Association, vol. 50(5), pages 1655-89, December.
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Citations

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Cited by:
  1. Viswanathan, S. & Wang, James J. D., 2002. "Market architecture: limit-order books versus dealership markets," Journal of Financial Markets, Elsevier, vol. 5(2), pages 127-167, April.
  2. BELTRAN, Helena & DURRE, Alain & GIOT, Pierre, 2005. "Volatility regimes and the provision of liquidity in order book markets," CORE Discussion Papers 2005012, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Degryse, Hans, 1999. "The total cost of trading Belgian shares: Brussels versus London," Journal of Banking & Finance, Elsevier, vol. 23(9), pages 1331-1355, September.
  4. Beltran, Helena & Durré, Alain & Giot, Pierre, 2009. "Volatility regimes and order book liquidity: Evidence from the Belgian segment of Euronext," Global Finance Journal, Elsevier, vol. 20(1), pages 80-97.
  5. : Arie E. Gozluklu, 2012. "Pre-Trade Transparency and Informed Trading an Experimental Approach to Hidden Liquidity," Working Papers wpn12-05, Warwick Business School, Finance Group.
  6. BELTRAN, Helena & GIOT, Pierre & GRAMMIG, Joachim, 2005. "Commonalities in the order book," CORE Discussion Papers 2005011, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Degryse, H.A., 1996. "Competition between auction and dealerships markets: Brussels versus London," Open Access publications from Tilburg University urn:nbn:nl:ui:12-72563, Tilburg University.
  8. Timotheos Angelidis & Alexandros Benos, 2009. "The Components of the Bid-Ask Spread: the Case of the Athens Stock Exchange," European Financial Management, European Financial Management Association, vol. 15(1), pages 112-144.
  9. Gajewski, Jean-Francois & Gresse, Carole, 2007. "Centralised order books versus hybrid order books: A paired comparison of trading costs on NSC (Euronext Paris) and SETS (London Stock Exchange)," Journal of Banking & Finance, Elsevier, vol. 31(9), pages 2906-2924, September.
  10. Nielsson, Ulf, 2009. "Stock exchange merger and liquidity: The case of Euronext," Journal of Financial Markets, Elsevier, vol. 12(2), pages 229-267, May.
  11. Marco Pagano, 1998. "The Changing Microstructure of European Equity Markets," CSEF Working Papers 04, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  12. Frey, Stefan & Sandås, Patrik, 2009. "The impact of iceberg orders in limit order books," CFR Working Papers 09-06, University of Cologne, Centre for Financial Research (CFR).

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