Fourteen at One Blow: The Market Entry of Turquoise
University of Bonn - The Bonn Graduate School of Economics
University of Mannheim - Finance Area
December 31, 2009
This paper analyzes the market entry of Turquoise in September 2008. Turquoise started trading stocks from 14 European countries at (almost) the same time. We find that Turquoise gained higher market shares in larger and less volatile stocks, and in stocks that had excessively high pre-entry spreads. We find evidence that the entry of Turquoise led to a decrease in spreads. The evidence in favor of an increase in trading volume is weaker. Turquoise does not generally offer lower execution costs than the primary market. Taken together our results are consistent with the view that the new entrant serves as a disciplinary device that reduces rents earned by the suppliers of liquidity in the primary market.
Number of Pages in PDF File: 35
Keywords: Competition for order flow, trading volume, liquidity
JEL Classification: G10, G12, G15working papers series
Date posted: March 16, 2010
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