Abstract

http://ssrn.com/abstract=1747645
 
 

References (24)



 


 



Competition in Securities Markets: The Impact on Liquidity


Michael Chlistalla


Goethe University Frankfurt Faculty of Economics and Business Administration

Marco Lutat


Goethe University Frankfurt Faculty of Economics and Business Administration

June 1, 2010

Financial Markets and Portfolio Management, 25(2), pp. 149-172

Abstract:     
Competition for order flow has been widely documented for US markets, but it seems to be a relatively new phenomenon in European equities trading. Only with the Markets in Financial Instruments Directive, which came into effect in November 2007, new trading venues have emerged in Europe that for the first time ever seriously threaten established exchanges. Chi-X, one of the new competitors, has gained a considerable market share, eroding the traditional exchanges' share of equities trading volumes. As the proliferation of new trading venues in Europe increases the danger of market fragmentation, this paper analyzes the potentially positive liquidity implications of a new trading venue. To this end, we examine the impact of the Chi-X market entry in French blue chip equities on the liquidity of their home market. Our findings suggest that in consequence of the new competitor’s market entry, liquidity in the most actively traded stocks has enhanced on the home market during the observation period. This improvement exceeds the general European liquidity trend measured by a matching firm approach, which implies that despite of a fragmentation of order flow market quality may even enhance.

Number of Pages in PDF File: 21

Keywords: Electronic Market, Trading, Liquidity, Fragmentation, Exchanges

JEL Classification: G14

working papers series





Download This Paper

Date posted: May 4, 2012  

Suggested Citation

Chlistalla, Michael and Lutat, Marco, Competition in Securities Markets: The Impact on Liquidity (June 1, 2010). Financial Markets and Portfolio Management, 25(2), pp. 149-172. Available at SSRN: http://ssrn.com/abstract=1747645 or http://dx.doi.org/10.2139/ssrn.1747645

Contact Information

Michael Chlistalla (Contact Author)
Goethe University Frankfurt Faculty of Economics and Business Administration ( email )
Grueneburgplatz 1
Frankfurt am Main, 60323
Germany
HOME PAGE: http://www.efinancelab.de/no_cache/team/?user_wiwipubs_pi2[showUid]=686
Marco Lutat
Goethe University Frankfurt Faculty of Economics and Business Administration ( email )
Grueneburgplatz 1
Frankfurt am Main, 60323
Germany
HOME PAGE: http://www.efinancelab.de/no_cache/team/?user_wiwipubs_pi2[showUid]=548
Feedback to SSRN


Paper statistics
Abstract Views: 1,029
Downloads: 171
Download Rank: 105,700
References:  24
People who downloaded this paper also downloaded:
1. High Frequency Trading and Price Discovery
By Jonathan Brogaard, Terrence Hendershott, ...

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.265 seconds