Trading Fees and Intermarket Competition

58 Pages Posted: 18 Apr 2017  

Marios A. Panayides

University of Pittsburgh - Katz Graduate School of Business

Barbara Rindi

Bocconi University and IGIER and CAREFIN

Ingrid M. Werner

The Ohio State University - Fisher College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: January 31, 2017

Abstract

We model an order book with liquidity rebates (make fees) and trading fees (take fees) that faces intermarket competition, and use the models insights to explain changes in market quality and market shares following changes in make-take fees. As predicted by our model, we document that fee changes by one venue affect market quality and market shares for all venues that compete for order flow. Furthermore, we document cross-sectional differences in changes in market quality and market shares following a simultaneous decrease in both make and take fees consistent with traders in large (small) capitalization stocks being more sensitive to the change in make (take) fees.

Keywords: Trading Fees, Maker-Taker Pricing, Intermarket Competition, Limit Order Book

JEL Classification: G10, G12, G14, G18, G20, D40, D47

Suggested Citation

Panayides, Marios A. and Rindi, Barbara and Werner, Ingrid M., Trading Fees and Intermarket Competition (January 31, 2017). BAFFI CAREFIN Centre Research Paper No. 2017-51. Available at SSRN: https://ssrn.com/abstract=2954512

Marios A. Panayides

University of Pittsburgh - Katz Graduate School of Business ( email )

372 Mervis Hall
Pittsburgh, PA 15260
United States

Barbara Rindi (Contact Author)

Bocconi University and IGIER and CAREFIN ( email )

Via Roentgen 1
Milan, 20136
Italy
+39 58365328 (Phone)

HOME PAGE: http://faculty.unibocconi.eu/barbararindi

Ingrid M. Werner

The Ohio State University - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-292-6460 (Phone)
614-292-2418 (Fax)

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