Download this Paper Open PDF in Browser

Differential Access to Price Information in Financial Markets

59 Pages Posted: 18 Mar 2011 Last revised: 26 Feb 2016

David Easley

Cornell University - Department of Economics

Maureen O'Hara

Cornell University - Samuel Curtis Johnson Graduate School of Management

Liyan Yang

University of Toronto - Rotman School of Management

Date Written: February 1, 2013

Abstract

Recently exchanges have been directly selling market data. We analyze how this practice affects price discovery, the cost of capital, return volatility, and market liquidity. We show that selling price data increases the cost of capital and volatility, worsens market efficiency and liquidity, and discourages the production of fundamental information relative to a world in which all traders freely observe prices. Generally allowing exchanges to sell price information benefits exchanges and harms liquidity traders. Overall, our results show that allowing exchanges to sell market data, rather than requiring it to be made freely available to the public, is undesirable.

Keywords: Price Data Selling, Cost of Capital, Liquidity, Volatility, Information Acquisition, Complementarities

JEL Classification: G12, G14, G18, D82

Suggested Citation

Easley, David and O'Hara, Maureen and Yang, Liyan, Differential Access to Price Information in Financial Markets (February 1, 2013). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming; Johnson School Research Paper Series No. 11-2011. Available at SSRN: https://ssrn.com/abstract=1787029 or http://dx.doi.org/10.2139/ssrn.1787029

David Easley (Contact Author)

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States
607-255-6283 (Phone)
607-255-2818 (Fax)

Maureen O'Hara

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States
607-255-3645 (Phone)
607-255-5993 (Fax)

Liyan Yang

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Paper statistics

Downloads
978
Rank
18,011
Abstract Views
4,338