The Effect of Crossing-Network Trading on Dealer Market's Bid-Ask Spreads
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.
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|Date of creation:||2006|
|Date of revision:|
|Publication status:||Published in European Financial Management, 2006, Vol. 12, no. 2. pp. 143-160.Length: 17 pages|
|Contact details of provider:|| Web page: http://www.dauphine.fr/en/welcome.html|
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