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Electronic Call Market Trading

  • Nicholas Economides

    ()

    (New York University, NY 10012-1126., Stern School of Business)

  • Robert Schwartz,

Despite its power as a transactions network, scant attention has been given to incorporating an electronic call into a major market center such as the NYSE or Nasdaq. An electronic call clears the markets for all assets at predetermined points in time. By bunching many transactions together, a call market increases liquidity, thereby decreasing transaction costs for public participants. After describing alternative call market structures and their attributes, we propose that an open book electronic call be held three times during the trading day: at the open, at 12:00 noon, and at the close. We discuss the impact of this innovation on an array of issues, including order flow and handling, information revelation, and market transparency. We also discuss the proposed changes from the perspectives of investors, listed companies, exchanges, brokers, and regulators.

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File URL: http://raven.stern.nyu.edu/networks/jpm95ps.zip
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Paper provided by Economics of Networks in its series Financial Networks with number _001.

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Handle: RePEc:wop:ennefn:_001
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  1. Nicholas Economides & Robert A. Schwartz, . "Making the Trade: Equity Trading Practices and Market Structure - 1994," Financial Networks _003, Economics of Networks.
  2. Joseph Farrell & Garth Saloner, 1984. "Standardization, Compatibility and Innovation," Working papers 345, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Economides, Nicholas & White, Lawrence J., 1994. "Networks and compatibility: Implications for antitrust," European Economic Review, Elsevier, vol. 38(3-4), pages 651-662, April.
  4. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
  5. Jeffrey Rohlfs, 1974. "A Theory of Interdependent Demand for a Communications Service," Bell Journal of Economics, The RAND Corporation, vol. 5(1), pages 16-37, Spring.
  6. Economides, Nicholas, 1989. "Desirability of Compatibility in the Absence of Network Externalities," American Economic Review, American Economic Association, vol. 79(5), pages 1165-81, December.
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