IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/hal-01193061.html
   My bibliography  Save this paper

Banks' shareholding in multilateral trading facilities: A two-sided market perspective

Author

Listed:
  • Delphine Lahet

    (Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales - UB - Université de Bordeaux)

  • Anne-Gaël Vaubourg

    (Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales - UB - Université de Bordeaux)

Abstract

The aim of this paper is to account for the observation that banks are both owners and clients of Multilateral Trading Facilities (MTFs) which were created in Europe after the implementation of the Markets in Financial Instruments Directive (MiFID). Using a duopoly model of two-sided markets, we show that banks' participation in MTFs crucially affects their objective function shape, pricing policy and profit. We show that when brokerage and trading activities are particularly important for banks' revenue compared to their profit as MTF operators, some market outcomes may emerge, whereby both MTFs include banks' interest as clients in their objective function. In these situations, although they earn negative profit as shareholders, banks benefit from lower fees as MTF's clients. This finally results in larger global revenue. This may explain why banks are at the origin of the creation of MTFs and why they maintain their stake despite negative profit. JEL codes: G10 G23 G24 L10 L11 L22

Suggested Citation

  • Delphine Lahet & Anne-Gaël Vaubourg, 2015. "Banks' shareholding in multilateral trading facilities: A two-sided market perspective," Working Papers hal-01193061, HAL.
    • Handle: RePEc:hal:wpaper:hal-01193061
    Note: View the original document on HAL open archive server: https://hal.science/hal-01193061
    as

    Download full text from publisher

    File URL: https://hal.science/hal-01193061/document
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Johannes A. Skjeltorp & Elvira Sojli & Wing Wah Tham, 2012. "Identifying cross-sided liquidity externalities," Working Paper 2012/20, Norges Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lahet, Delphine & Vaubourg, Anne-Gaël, 2017. "Bank ownership of multilateral trading facilities and implications for historical exchanges: An industrial economics approach," Economic Modelling, Elsevier, vol. 65(C), pages 9-17.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Aal, P.K. & Sousa, K.R. de A. & Salles, L.S.A. de Campos & Koehler, M., 2021. "Liquidity externality in a market of buying adjustable agents," Chaos, Solitons & Fractals, Elsevier, vol. 152(C).
    2. Marios Panayides & Barbara Rindi & Ingrid M.Werner, 2017. "Trading Fees and Intermarket Competition," BAFFI CAREFIN Working Papers 1751, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    3. Jeffrey R. Black, 2022. "The impact of make-take fees on market efficiency," Review of Quantitative Finance and Accounting, Springer, vol. 58(3), pages 1015-1035, April.
    4. Roberto Riccó & Barbara Rindi & Duane J. Seppi, 2021. "Optimal Market Asset Pricing," Working Papers 675, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    5. Marios Panayides & Barbara Rindi & Ingrid M. Werner, 2017. "Trading Fees and Intermarket Competition," Working Papers 595, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    6. Peter Lerner, 2015. "Patience vs. impatience of traders: Formation of the value-at-price distribution through competition for liquidity," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 2(03), pages 1-30.

    More about this item

    Keywords

    banks; shareholding; multilateral trading facilities; two-sided markets;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • G2 - Financial Economics - - Financial Institutions and Services

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-01193061. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.