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Technological development and concentration of stock exchanges in Europe

  • Schmiedel, Heiko

    (Bank of Finland Reseach (Visiting Scholar))

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    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.

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    Paper provided by Bank of Finland in its series Research Discussion Papers with number 21/2001.

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    Length: 41 pages
    Date of creation: 08 Oct 2001
    Date of revision:
    Handle: RePEc:hhs:bofrdp:2001_021
    Contact details of provider: Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
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