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Competition between exchanges: A research agenda

  • Cantillon, Estelle
  • Yin, Pai-Ling

This paper describes open research questions related to the competition and market structure of financial exchanges and argues that only a combination of industrial organization and finance can satisfactorily attack these questions. Two examples are discussed to illustrate how the combination of these two approaches can significantly enrich the analysis: the "network externality puzzle", which refers to the question of why trading for the same security is often split across trading venues, and the impact of the multi-sided character of financial exchanges on pricing and profitability.

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File URL: http://www.sciencedirect.com/science/article/B6V8P-51TGFYG-1/2/c67c6b7825b61edc10672016c3da30cd
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Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 29 (2011)
Issue (Month): 3 (May)
Pages: 329-336

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Handle: RePEc:eee:indorg:v:29:y:2011:i:3:p:329-336
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505551

References listed on IDEAS
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  1. Marc Rysman, 2009. "The Economics of Two-Sided Markets," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 125-43, Summer.
  2. Thierry Foucault & Christine a Parlour, . "Competition for Listings," GSIA Working Papers 2000-E11, Carnegie Mellon University, Tepper School of Business.
  3. Cantillon, Estelle & Yin, Pai-Ling, 2008. "Competition between Exchanges: Lessons from the Battle of the Bund," CEPR Discussion Papers 6923, C.E.P.R. Discussion Papers.
  4. Igal Hendel & Aviv Nevo & François Ortalo-Magné, 2007. "The Relative Performance of Real Estate Marketing Platforms: MLS versus FSBOMadison.com," NBER Working Papers 13360, National Bureau of Economic Research, Inc.
  5. Economides, Nicholas & Siow, Aloysius, 1988. "The Division of Markets is Limited by the Extent of Liquidity (Spatial Competition with Externalities)," American Economic Review, American Economic Association, vol. 78(1), pages 108-21, March.
  6. Felipe Zurita & Alexander Galetovic, 2002. "Liquidity and the Simple Industrial Organization of Stock Exchanges," Documentos de Trabajo 211, Instituto de Economia. Pontificia Universidad Católica de Chile..
  7. Glenn Ellison & Drew Fudenberg, 2003. "Knife Edge of Plateau: When Do Market Models Tip?," NBER Working Papers 9528, National Bureau of Economic Research, Inc.
  8. Wright Julian, 2004. "One-sided Logic in Two-sided Markets," Review of Network Economics, De Gruyter, vol. 3(1), pages 1-21, March.
  9. Madhavan, Ananth, 1995. "Consolidation, Fragmentation, and the Disclosure of Trading Information," Review of Financial Studies, Society for Financial Studies, vol. 8(3), pages 579-603.
  10. Carmine Di Noia, 2001. "Competition and Integration among Stock Exchanges in Europe: Network Effects, Implicit Mergers and Remote Access," European Financial Management, European Financial Management Association, vol. 7(1), pages 39-72.
  11. Foucault, Thierry & Kadan, Ohad & Kandel, Eugene, 2009. "Liquidity cycles and make/take fees in electronic markets," CEPR Discussion Papers 7551, C.E.P.R. Discussion Papers.
  12. Ernan Haruvy & Peter Popkowski Leszczyc & Octavian Carare & James Cox & Eric Greenleaf & Wolfgang Jank & Sandy Jap & Young-Hoon Park & Michael Rothkopf, 2008. "Competition between auctions," Marketing Letters, Springer, vol. 19(3), pages 431-448, December.
  13. Alexander Galetovic & Felipe Zurita, 2002. "Liquidity and the Simple IO of Stock Exchanges," Documentos de Trabajo 123, Centro de Economía Aplicada, Universidad de Chile.
  14. Andrew Kato & Ginger Jin, 2004. "Dividing online and offline: A case study," Natural Field Experiments 00276, The Field Experiments Website.
  15. Degryse, Hans & Van Achter, Mark & Wuyts, Gunther, 2009. "Dynamic order submission strategies with competition between a dealer market and a crossing network," Journal of Financial Economics, Elsevier, vol. 91(3), pages 319-338, March.
  16. Pagano, Marco, 1986. "Trading Volume and Asset Liquidity," CEPR Discussion Papers 142, C.E.P.R. Discussion Papers.
  17. Biais, Bruno & Green, Richard, 2007. "The Microstructure of the Bond Market in the 20th Century," IDEI Working Papers 482, Institut d'Économie Industrielle (IDEI), Toulouse.
  18. Hans R. Stoll, 2006. "Electronic Trading in Stock Markets," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 153-174, Winter.
  19. Terrence Hendershott & Charles M. Jones, 2005. "Island Goes Dark: Transparency, Fragmentation, and Regulation," Review of Financial Studies, Society for Financial Studies, vol. 18(3), pages 743-793.
  20. Foucault, Thierry & Menkveld, Albert, 2006. "Competition for order flow and smart order routing systems," Les Cahiers de Recherche 831, HEC Paris.
  21. Madhavan, Ananth, 2000. "Market microstructure: A survey," Journal of Financial Markets, Elsevier, vol. 3(3), pages 205-258, August.
  22. Macey, Jonathan R. & O'Hara, Maureen, 2002. "The Economics of Stock Exchange Listing Fees and Listing Requirements," Journal of Financial Intermediation, Elsevier, vol. 11(3), pages 297-319, July.
  23. Biais, Bruno & Glosten, Larry & Spatt, Chester, 2004. "Market Microstructure: A Survey of Microfoundations, Empirical Results, and Policy Implications," IDEI Working Papers 253, Institut d'Économie Industrielle (IDEI), Toulouse.
  24. Terrence Hendershott & Haim Mendelson, 2000. "Crossing Networks and Dealer Markets: Competition and Performance," Journal of Finance, American Finance Association, vol. 55(5), pages 2071-2115, October.
  25. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
  26. Bessembinder, Hendrik & Kaufman, Herbert M., 1997. "A cross-exchange comparison of execution costs and information flow for NYSE-listed stocks," Journal of Financial Economics, Elsevier, vol. 46(3), pages 293-319, December.
  27. P. Gomber & M. Gsell, 2006. "Catching Up with Technology - The Impact of Regulatory Changes on ECNs/MTFs and the Trading Venue Landscape in Europe," Competition and Regulation in Network Industries, Intersentia, vol. 7(4), pages 535-558, December.
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