Who Benefits from Securities Exchange Innovation?

49 Pages Posted: 4 May 2021 Last revised: 16 Aug 2021

See all articles by Andriy Shkilko

Andriy Shkilko

Wilfrid Laurier University - Lazaridis School of Business and Economics

Konstantin Sokolov

University of Memphis - Fogelman College of Business and Economics

Eduard Yelagin

University of Memphis - Fogelman College of Business and Economics

Date Written: April 28, 2021

Abstract

Securities exchanges continuously innovate to keep pace with technology. It is often debated if such innovation is beneficial and which market participants capture the benefits. We contribute to this debate by examining liquidity effects of a wide range of proprietary products and services introduced by exchanges in the United States between 2003 and 2017. Exchange innovation is generally associated with liquidity improvements for those investors, who trade in small quantities. The effect is opposite for institutional investors; their trading costs increase, and their market participation declines.

Keywords: liquidity, market quality, equity trading, innovation

JEL Classification: G14, G15

Suggested Citation

Shkilko, Andriy and Sokolov, Konstantin and Yelagin, Eduard, Who Benefits from Securities Exchange Innovation? (April 28, 2021). Available at SSRN: https://ssrn.com/abstract=3836084 or http://dx.doi.org/10.2139/ssrn.3836084

Andriy Shkilko (Contact Author)

Wilfrid Laurier University - Lazaridis School of Business and Economics ( email )

LH 4050
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Waterloo, Ontario N2L3C5
Canada
519.884.0710 ext. 2462 (Phone)
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Konstantin Sokolov

University of Memphis - Fogelman College of Business and Economics ( email )

Memphis, TN 38152
United States

Eduard Yelagin

University of Memphis - Fogelman College of Business and Economics ( email )

Memphis, TN 38152
United States

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