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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

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  1. 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.
  2. Thierry Foucault & Ohad Kadan & Eugene Kandel, 2013. "Liquidity Cycles and Make/Take Fees in Electronic Markets," Journal of Finance, American Finance Association, vol. 68(1), pages 299-341, 02.
  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. Hans Degryse & Mark Van Achter & Gunther Wuyts, 2007. "Dynamic order submission strategies with competition between a dealer market and a crossing network," Working Paper Research 121, National Bank of Belgium.
  5. Andrew Kato & Ginger Jin, 2004. "Dividing online and offline: A case study," Natural Field Experiments 00276, The Field Experiments Website.
  6. Marc Rysman, 2009. "The Economics of Two-Sided Markets," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 125-43, Summer.
  7. Pagano, Marco, 1986. "Trading Volume and Asset Liquidity," CEPR Discussion Papers 142, C.E.P.R. Discussion Papers.
  8. 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.
  9. Glenn Ellison & Drew Fudenberg, 2003. "Knife-Edge or Plateau: When do Market Models Tip?," Levine's Working Paper Archive 506439000000000098, David K. Levine.
  10. Jean‐Charles Rochet & Jean Tirole, 2006. "Two‐sided markets: a progress report," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 645-667, 09.
  11. Biais, Bruno & Glosten, Larry & Spatt, Chester, 2005. "Market microstructure: A survey of microfoundations, empirical results, and policy implications," Journal of Financial Markets, Elsevier, vol. 8(2), pages 217-264, May.
  12. 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.
  13. Bruno Biais & Richard C. Green, . "The Microstructure of the Bond Market in the 20th Century," GSIA Working Papers 2005-E57, Carnegie Mellon University, Tepper School of Business.
  14. Foucault, Thierry & Parlour, Christine A, 1999. "Competition for Listings," CEPR Discussion Papers 2222, C.E.P.R. Discussion Papers.
  15. 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.
  16. Ernan Haruvy & Peter T. L. Popkowski Leszczyc & Octavian Carare & James C. Cox & Eric A. Greenleaf & Wolfgang Jank & Sandy Jap & Young-Hoon Park & Michael H. Rothkopf, 2008. "Competition Between Auctions," Experimental Economics Center Working Paper Series 2008-02, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University.
    • 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.
  17. 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.
  18. Foucault, Thierry & Menkveld, Albert, 2006. "Competition for order flow and smart order routing systems," Les Cahiers de Recherche 831, HEC Paris.
  19. Igal Hendel & Aviv Nevo & François Ortalo-Magné, 2009. "The Relative Performance of Real Estate Marketing Platforms: MLS versus FSBOMadison.com," American Economic Review, American Economic Association, vol. 99(5), pages 1878-98, December.
  20. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
  21. Madhavan, Ananth, 2000. "Market microstructure: A survey," Journal of Financial Markets, Elsevier, vol. 3(3), pages 205-258, August.
  22. Alexander Galetovic & Felipe Zurita, 2002. "Liquidity and the Simple IO of Stock Exchanges," Documentos de Trabajo 123, Centro de Economía Aplicada, Universidad de Chile.
  23. 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.
  24. Hans R. Stoll, 2006. "Electronic Trading in Stock Markets," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 153-174, Winter.
  25. 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.
  26. Wright Julian, 2004. "One-sided Logic in Two-sided Markets," Review of Network Economics, De Gruyter, vol. 3(1), pages 1-21, March.
  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.
  28. 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..
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