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Competition between exchanges: A research agenda

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  • Cantillon, Estelle
  • Yin, Pai-Ling

Abstract

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.

Suggested Citation

  • Cantillon, Estelle & Yin, Pai-Ling, 2011. "Competition between exchanges: A research agenda," International Journal of Industrial Organization, Elsevier, vol. 29(3), pages 329-336, May.
  • Handle: RePEc:eee:indorg:v:29:y:2011:i:3:p:329-336
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. repec:eee:quaeco:v:64:y:2017:i:c:p:196-214 is not listed on IDEAS
    2. Castelle, Michael & Millo, Yuval & Beunza, Daniel & Lubin, David C., 2016. "Where do electronic markets come from? Regulation and the transformation of financial exchanges," LSE Research Online Documents on Economics 68650, London School of Economics and Political Science, LSE Library.
    3. Jean-Edouard Colliard & Thierry Foucault, 2012. "Trading Fees and Efficiency in Limit Order Markets," Review of Financial Studies, Society for Financial Studies, vol. 25(11), pages 3389-3421.
    4. Kei Kawakami, 2013. "Optimal Market Size," Department of Economics - Working Papers Series 1168, The University of Melbourne.
    5. Kei Kawakami, 2014. "Information Aggregation and Optimal Market Size," Department of Economics - Working Papers Series 1182, The University of Melbourne.
    6. Hans Degryse & Frank de Jong & Vincent van Kervel, 2015. "The Impact of Dark Trading and Visible Fragmentation on Market Quality," Review of Finance, European Finance Association, vol. 19(4), pages 1587-1622.
    7. Kei Kawakami, 2015. "Welfare Consequences of Information Aggregation and Optimal Market Size," Department of Economics - Working Papers Series 1189, The University of Melbourne.
    8. repec:eee:ecmode:v:65:y:2017:i:c:p:9-17 is not listed on IDEAS
    9. Nijman, Luuk, 2012. "The impact of the new wave of financial regulation for European energy markets," Energy Policy, Elsevier, vol. 47(C), pages 468-477.

    More about this item

    Keywords

    Network effects Two-sided markets Competition Tipping Market structure Market microstructure;

    JEL classification:

    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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