Who Benefits from Securities Exchange Innovation?

55 Pages Posted: 4 May 2021 Last revised: 25 Mar 2024

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

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Date Written: March 18, 2024

Abstract

Securities markets 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 the effects of a wide range of proprietary enhancements to the trading process introduced by the stock exchanges in the United States. Generally, exchange innovation is associated with improvements in liquidity and price efficiency, although the reduction in liquidity costs primarily benefits investors trading in small quantities. Institutional investors experience less favorable outcomes; while their trading costs remain unchanged, 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? (March 18, 2024). 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 )

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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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