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Fifty-shades of grey: competition between dark and lit pools in stock exchanges

Author

Listed:
  • Nathalie Oriol

    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur)

  • Alexandra Rufini

    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur)

  • Dominique Torre

    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur)

Abstract

Debate on financial market fragmentation has been revived by the rise of dark pools. Our theoretical setting analyzes the interaction between single-homing heterogeneous investors and trading services providers in the presence of market externalities. We compare different forms of regulated exchanges challenged by Over-The-Counter (OTC) facilities: a consolidated trading organization involving only one market firm, and fragmented ex-changes involving spatially differentiated platforms including lit and dark pools competing for order flows. By capturing OTC users, dark trading can enhance market externalities and market stakeholders' welfare. This result contributes to the ongoing regulatory debate on market structure regulation.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Nathalie Oriol & Alexandra Rufini & Dominique Torre, 2018. "Fifty-shades of grey: competition between dark and lit pools in stock exchanges," Post-Print halshs-01860709, HAL.
    • Handle: RePEc:hal:journl:halshs-01860709
    DOI: 10.1016/j.infoecopol.2018.08.001
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    Cited by:

    1. Ibikunle, Gbenga & Rzayev, Khaladdin, 2023. "Volatility and dark trading: Evidence from the Covid-19 pandemic," The British Accounting Review, Elsevier, vol. 55(4).

    More about this item

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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