Date
2006
Dewey
Economie financière
Sujet
Bid-ask spread; Fragmentation; Liquidity; Dealer markets; Crossing networks; Alternative trading systems; Transaction costs; Risk sharing; Stocks
JEL code
G12; G14; G15; G19
Journal issue
European Financial Management
Volume
12
Number
2
Publication date
2006
Article pages
143-160
Publisher
Blackwell Publishing
Type
Article accepté pour publication ou publié
Abstract (EN)
This article provides new insights into market competition between traditional exchanges and alternative trading systems in Europe. It investigates the relationship between the trading activity of a crossing network (CN) and the liquidity of a traditional dealer market (DM) by comparing data from the SEAQ quote-driven segment of the London Stock Exchange (LSE) and internal data from the POSIT crossing network. A cross-sectional analysis of bid-ask spreads shows that DM spreads are negatively related to CN executions. Risk-sharing benefits from CN trading dominate fragmentation and cream-skimming costs. Further, risk-sharing gains are found to be related to dealer trading in the CN.