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Electronic Call Market Trading

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  • Nicholas Economides

    ()
    (New York University, NY 10012-1126., Stern School of Business)

  • Robert Schwartz,

Abstract

Despite its power as a transactions network, scant attention has been given to incorporating an electronic call into a major market center such as the NYSE or Nasdaq. An electronic call clears the markets for all assets at predetermined points in time. By bunching many transactions together, a call market increases liquidity, thereby decreasing transaction costs for public participants. After describing alternative call market structures and their attributes, we propose that an open book electronic call be held three times during the trading day: at the open, at 12:00 noon, and at the close. We discuss the impact of this innovation on an array of issues, including order flow and handling, information revelation, and market transparency. We also discuss the proposed changes from the perspectives of investors, listed companies, exchanges, brokers, and regulators.

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Bibliographic Info

Paper provided by Economics of Networks in its series Financial Networks with number _001.

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Handle: RePEc:wop:ennefn:_001

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References

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  1. Jeffrey Rohlfs, 1974. "A Theory of Interdependent Demand for a Communications Service," Bell Journal of Economics, The RAND Corporation, vol. 5(1), pages 16-37, Spring.
  2. Joseph Farrell & Garth Saloner, 1985. "Standardization, Compatibility, and Innovation," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 70-83, Spring.
  3. Nicholas Economides & Robert A. Schwartz, . "Making the Trade: Equity Trading Practices and Market Structure - 1994," Financial Networks _003, Economics of Networks.
  4. Economides, Nicholas, 1989. "Desirability of Compatibility in the Absence of Network Externalities," American Economic Review, American Economic Association, vol. 79(5), pages 1165-81, December.
  5. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
  6. Economides, Nicholas & White, Lawrence J., 1994. "Networks and compatibility: Implications for antitrust," European Economic Review, Elsevier, vol. 38(3-4), pages 651-662, April.
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Cited by:
  1. Nicholas Economides & Robert A. Schwartz,, . "Equity Trading Practices and Market Structure: Assessing Asset Managers' Demand for Immediacy," Financial Networks 9508, Economics of Networks.
  2. Bruce Mizrach & Christopher J. Neely, 2006. "The transition to electronic communications networks in the secondary treasury market," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 527-542.
  3. Hasan, Iftekhar & Schmiedel , Heiko, 2003. "Do networks in the stock exchange industry pay off? European evidence," Research Discussion Papers 2/2003, Bank of Finland.
  4. Nicholas Economides & Jeff Heisler, 1994. "Equilibrium Fee Schedules in a Monopolist Call Market," Working Papers 94-15, New York University, Leonard N. Stern School of Business, Department of Economics.
  5. Jens Tapking & Jing Yang, 2004. "Horizontal and vertical integration in securities trading and settlement," Bank of England working papers 245, Bank of England.
  6. Silvio John Camilleri & Christopher J. Green, 2004. "The Impact of the Suspension of Opening and Closing Call," Finance 0411012, EconWPA.
  7. Nicholas Economides,, . "How to Enhance Market Liquidity," Financial Networks _002, Economics of Networks.
  8. Shah, Ajay & Fernandes, Kshama, 2000. "The relevance of index funds for pension investment in equities," Policy Research Working Paper Series 2494, The World Bank.
  9. Giovanni Cespa, 2003. "A Comparison of Stock Market Mechanism," CSEF Working Papers 94, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.

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