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Technological development and concentration of stock exchanges in Europe

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  • Schmiedel, Heiko

Abstract

This paper provides an explanation of technical inefficiencies of financial exchanges in Europe as well as an empirical analysis of their existence and extent.A single-stage stochastic cost frontier approach is employed, which generates exchange inefficiency scores based on a unique unbalanced panel data set for all major European financial exchanges over the period 1985-1999.Overall cost inefficiency scores reveal that European exchanges operate at 20-25% above the efficiency benchmark.The results also affirm that size of exchange; market concentration and quality; structural reorganisations of exchange governance; diversification in trading service activities; and adoption of automated trading systems significantly influence the efficient provision of trading services in Europe.Over the sample period, European exchanges notably improved their ability to efficiently manage their production and input resources.Key words: Europe, financial exchanges, panel data, technical efficiency

Suggested Citation

  • Schmiedel, Heiko, 2001. "Technological development and concentration of stock exchanges in Europe," Research Discussion Papers 21/2001, Bank of Finland.
  • Handle: RePEc:bof:bofrdp:2001_021
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    Cited by:

    1. Heiko Schmiedel & Markku Malkamäki & Juha Tarkka, 2004. "Economies of scale and technological development in securities depository and settlement systems," Microeconomics 0405002, University Library of Munich, Germany.
    2. Baris Serifsoy, 2008. "Demutualization, outsider ownership, and stock exchange performance: empirical evidence," Economics of Governance, Springer, vol. 9(4), pages 305-339, October.
    3. Li, Shaofang & Marinč, Matej, 2018. "Economies of scale and scope in financial market infrastructures," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 53(C), pages 17-49.
    4. Josanco Floreani & Maurizio Polato, 2010. "Consolidation and Business Strategies in the Securities Industry: How Securities Exchanges Create Value?," Research in World Economy, Research in World Economy, Sciedu Press, vol. 1(1), pages 28-42, November.
    5. Hasan, Iftekhar & Schmiedel, Heiko, 2003. "Do networks in the stock exchange industry pay off? : European evidence," Research Discussion Papers 2/2003, Bank of Finland.
    6. Faten Ben Slimane, 2012. "Stock exchange consolidation and return volatility," Managerial Finance, Emerald Group Publishing, vol. 38(6), pages 606-627, May.
    7. Schmiedel, Heiko, 2002. "Total factor productivity growth in European stock exchanges : A non-parametric frontier approach," Research Discussion Papers 11/2002, Bank of Finland.
    8. Serifsoy, Baris, 2007. "Stock exchange business models and their operative performance," Journal of Banking & Finance, Elsevier, vol. 31(10), pages 2978-3012, October.
    9. Schmiedel, Heiko & Malkamäki, Markku & Tarkka, Juha, 2002. "Economies of scale and technological development in securities depository and settlement systems," Research Discussion Papers 26/2002, Bank of Finland.
    10. Hasan, Iftekhar & Schmiedel, Heiko, 2004. "Networks and equity market integration: European evidence," International Review of Financial Analysis, Elsevier, vol. 13(5), pages 601-619.
    11. Nielsson, Ulf, 2009. "Stock exchange merger and liquidity: The case of Euronext," Journal of Financial Markets, Elsevier, vol. 12(2), pages 229-267, May.
    12. Hasan, Iftekhar & Malkamaki, Markku & Schmiedel, Heiko, 2003. "Technology, automation, and productivity of stock exchanges: International evidence," Journal of Banking & Finance, Elsevier, vol. 27(9), pages 1743-1773, September.
    13. Camilleri, Silvio John, 2006. "Strategic Priorities for Stock Exchanges in New EU Member States," MPRA Paper 62494, University Library of Munich, Germany.
    14. Jens Köke & Michael Schröder, 2003. "The Prospects of Capital Markets in Central and Eastern Europe," Eastern European Economics, Taylor & Francis Journals, vol. 41(4), pages 5-37, July.
    15. Ben Slimane, FATEN, 2007. "L'Evolution des Marchés Boursiers Européens: Enjeux et limites
      [European Stock Market Evolution]
      ," MPRA Paper 2607, University Library of Munich, Germany.
    16. Heiko Schmiedel & Markku Malkamäki & Juha Tarkka, 2004. "Economies of scale and technological development in securities depository and settlement systems," Microeconomics 0405001, University Library of Munich, Germany.
    17. Joyce Hsieh & Chien-Chung Nieh, 2010. "An overview of Asian equity markets," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 24(2), pages 19-51, November.
    18. Azzam, Islam, 2010. "Stock exchange demutualization and performance," Global Finance Journal, Elsevier, vol. 21(2), pages 211-222.

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