Fourteen at One Blow: The Market Entry of Turquoise

35 Pages Posted: 19 Jan 2011

See all articles by Jördis Hengelbrock

Jördis Hengelbrock

University of Bonn - The Bonn Graduate School of Economics

Erik Theissen

University of Mannheim - Finance Area

Multiple version iconThere are 2 versions of this paper

Date Written: December 31, 2009

Abstract

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.

Keywords: Competition for Order Flow, Trading Volume, Liquidity

JEL Classification: G10, G12, G15

Suggested Citation

Hengelbrock, Jördis and Theissen, Erik, Fourteen at One Blow: The Market Entry of Turquoise (December 31, 2009). Available at SSRN: https://ssrn.com/abstract=1743589 or http://dx.doi.org/10.2139/ssrn.1743589

Jördis Hengelbrock

University of Bonn - The Bonn Graduate School of Economics ( email )

Adenauerallee 24-26
Bonn, D-53113
Germany

Erik Theissen (Contact Author)

University of Mannheim - Finance Area ( email )

Mannheim, 68131
Germany

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