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Do networks in the stock exchange industry pay off? European evidence

Author

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  • Hasan, Iftekhar
  • Schmiedel, Heiko

Abstract

The economic theory of network externalities provides the rationale for this paper, which investigates whether adoption of network strategies in European stock exchanges creates additional value in the provision of trading services.Using unbalanced panel data from all major European exchanges over the period 1996-2000, the paper examines empirically the presence of network effects on the liquidity, growth, and efficiency of the exchanges; the transaction cost of trades; and the cost of exchange operations.The evidence shows that adopting a network strategy is significantly associated with higher liquidity, growth and efficiency in the sample markets. Moreover, a network strategy helps to reduce transaction costs of trades as well as operational costs for stock exchanges.

Suggested Citation

  • Hasan, Iftekhar & Schmiedel, Heiko, 2003. "Do networks in the stock exchange industry pay off? European evidence," Bank of Finland Research Discussion Papers 2/2003, Bank of Finland.
    • Handle: RePEc:zbw:bofrdp:rdp2003_002
    as

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    File URL: https://www.econstor.eu/bitstream/10419/211935/1/bof-rdp2003-002.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    stock exchanges; network externalities; remote access; Europe;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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