Centralised Order Books Versus Hybrid Order Books: A Paired Comparison of Trading Costs on NSC (Euronext Paris) and SETS (London Stock Exchange)

Posted: 14 Jun 2003 Last revised: 16 Dec 2014

See all articles by Jean-Francois Gajewski

Jean-Francois Gajewski

University Savoie Mont-Blanc, IREGE

Carole Gresse

Université Paris-Dauphine, PSL

Date Written: June 1, 2003

Abstract

This article compares the cost of trading large capitalisation equities on the hybrid order-driven segment of the London Stock Exchange and the centralised electronic order book of Euronext. Using samples of stocks matched according to economic sector, free float capitalisation, and trading volume, our study shows that transaction costs are lower on the centralised order book than on the hybrid order book. The presence of dealers outside the electronic order book favours the frequency of large trades, but is associated with higher execution costs for all other trades and higher adverse selection and inventory costs inside the order book.

Keywords: transaction costs, spread components, order book, hybrid market, centralised market, fragmentation

JEL Classification: G19

Suggested Citation

Gajewski, Jean-Francois and Gresse, Carole, Centralised Order Books Versus Hybrid Order Books: A Paired Comparison of Trading Costs on NSC (Euronext Paris) and SETS (London Stock Exchange) (June 1, 2003). Journal of Banking and Finance, Vol. 31, No. 9, 2007. Available at SSRN: https://ssrn.com/abstract=406662 or http://dx.doi.org/10.2139/ssrn.406662

Jean-Francois Gajewski

University Savoie Mont-Blanc, IREGE ( email )

4 Chemin de Bellevue
BP 80439
Annecy-le-Vieux, 74944
France
33 6 10 32 71 06 (Phone)
33 4 50 09 24 39 (Fax)

HOME PAGE: http://www.univ-savoie.fr/

Carole Gresse (Contact Author)

Université Paris-Dauphine, PSL ( email )

DRM
Pôle Universitaire Léonard de Vinci
Paris La Défense cedex, 92916
France
+33 (0)1 41 16 76 15 (Phone)
+33 (0)1 41 16 76 37 (Fax)

HOME PAGE: http://www.carolegresse.com

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