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The Effect of Crossing-Network Trading on Dealer Market's Bid-Ask Spreads

  • Carole Gresse
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    "This article provides new insights into market competition between traditional exchanges and alternative trading systems in Europe. It investigates the relationship between the trading activity of a crossing network (CN) and the liquidity of a traditional dealer market (DM) by comparing data from the SEAQ quote-driven segment of the London Stock Exchange (LSE) and internal data from the POSIT crossing network. A cross-sectional analysis of bid-ask spreads shows that DM spreads are negatively related to CN executions. Risk-sharing benefits from CN trading dominate fragmentation and cream-skimming costs. Further, risk-sharing gains are found to be related to dealer trading in the CN." Copyright Blackwell Publishers Ltd, 2006.

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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1354-7798.2006.00314.x
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    Article provided by European Financial Management Association in its journal European Financial Management.

    Volume (Year): 12 (2006)
    Issue (Month): 2 ()
    Pages: 143-160

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    Handle: RePEc:bla:eufman:v:12:y:2006:i:2:p:143-160
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