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Liquidity provider incentives in fragmented securities markets

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  • Clapham, Benjamin
  • Gomber, Peter
  • Lausen, Jens
  • Panz, Sven

Abstract

We study the introduction of single-market liquidity provider incentives in fragmented securities markets. Specifically, we investigate whether fee rebates for liquidity providers enhance liquidity on the introducing market and thereby increase its competitiveness and market share. Further, we analyze whether single-market liquidity provider incentives increase overall market liquidity available for market participants. Therefore, we measure the specific liquidity contribution of individual markets to the aggregate liquidity in the fragmented market environment. While liquidity and market share of the venue introducing incentives increase, we find no significant effect for turnover and liquidity of the whole market.

Suggested Citation

  • Clapham, Benjamin & Gomber, Peter & Lausen, Jens & Panz, Sven, 2018. "Liquidity provider incentives in fragmented securities markets," SAFE Working Paper Series 231, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safewp:231
    DOI: 10.2139/ssrn.2970452
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    References listed on IDEAS

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    More about this item

    Keywords

    Liquidity; Trading Volume; Market Fragmentation; Liquidity Provider Incentives; Transaction Costs;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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