Liquidity Provider Incentives in Fragmented Securities Markets

40 Pages Posted: 19 May 2017 Last revised: 26 Sep 2018

See all articles by Benjamin Clapham

Benjamin Clapham

Goethe University Frankfurt Faculty of Economics and Business Administration

Peter Gomber

Goethe University Frankfurt Faculty of Economics and Business Administration

Jens Lausen

Goethe University Frankfurt - Faculty of Economics and Business Administration

Sven Panz

Goethe University Frankfurt - Faculty of Economics and Business Administration

Date Written: July 31, 2018

Abstract

We study the introduction of single-market liquidity provider incentives in fragmented securities markets. Specifically, we investigate whether fee rebates for liquidity providers enhance liquidity on the introducing market and thereby increase its competitiveness and market share. Further, we analyze whether single-market liquidity provider incentives increase overall market liquidity available for market participants. Therefore, we measure the specific liquidity contribution of individual markets to the aggregate liquidity in the fragmented market environment. While liquidity and market share of the venue introducing incentives increase, we find no significant effect for turnover and liquidity of the whole market.

Keywords: Liquidity, Trading Volume, Market Fragmentation, Liquidity Provider Incentives, Transaction Costs

JEL Classification: G10, G14

Suggested Citation

Clapham, Benjamin and Gomber, Peter and Lausen, Jens and Panz, Sven, Liquidity Provider Incentives in Fragmented Securities Markets (July 31, 2018). SAFE Working Paper No. 231. Available at SSRN: https://ssrn.com/abstract=2970452 or http://dx.doi.org/10.2139/ssrn.2970452

Benjamin Clapham (Contact Author)

Goethe University Frankfurt Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno-Platz 4
Frankfurt am Main, 60323
Germany

Peter Gomber

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]=478

Jens Lausen

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno-Platz 4
Frankfurt am Main, D-60323
Germany

Sven Panz

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno-Platz 4
Frankfurt am Main, D-60325
Germany

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