Imperfect competition in financial markets / Bruno Biais in Management science, Vol. 56 N° 12 (Décembre 2010)  

Public ISBD [article]  inManagement science > Vol. 56 N° 12 (Décembre 2010) . - pp. 2237-2250 Titre : Imperfect competition in financial markets : An empirical study of Island and Nasdaq Type de document : texte imprimé Auteurs : Bruno Biais, Auteur ; Christophe Bisière, Auteur ; Chester Spatt, Auteur Année de publication : 2011 Article en page(s) : pp. 2237-2250 Note générale : Management Langues : Anglais (eng) Mots-clés : Competition in financial markets Liquidity supply Trading mechanisms Different tick sizes Index. décimale : 658 Organisation des entreprises. Techniques du commerce Résumé : The competition between Island and Nasdaq at the beginning of the century offers a natural laboratory to study competition between and within trading platforms and its consequences for liquidity supply. Our empirical strategy takes advantage of the difference between the pricing grids used on Island and Nasdaq, as well as of the decline in the Nasdaq tick. Using the finer grid prevailing on their market, Island limit order traders undercut Nasdaq quotes, much more than they undercut one another. The drop in the Nasdaq tick size triggered a drop in Island spreads, despite the Island tick already being very thin before Nasdaq decimalization. We also estimate a structural model of liquidity supply and find that Island limit order traders earned rents before Nasdaq decimalization. Our results suggest that perfect competition cannot be taken for granted, even on transparent open limit order books with a very thin pricing grid. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/cgi/content/abstract/56/12/2237 [article] Imperfect competition in financial markets : An empirical study of Island and Nasdaq [texte imprimé] / Bruno Biais, Auteur ; Christophe Bisière, Auteur ; Chester Spatt, Auteur . - 2011 . - pp. 2237-2250. Management Langues : Anglais (eng) in Management science > Vol. 56 N° 12 (Décembre 2010) . - pp. 2237-2250 Mots-clés : Competition in financial markets Liquidity supply Trading mechanisms Different tick sizes Index. décimale : 658 Organisation des entreprises. Techniques du commerce Résumé : The competition between Island and Nasdaq at the beginning of the century offers a natural laboratory to study competition between and within trading platforms and its consequences for liquidity supply. Our empirical strategy takes advantage of the difference between the pricing grids used on Island and Nasdaq, as well as of the decline in the Nasdaq tick. Using the finer grid prevailing on their market, Island limit order traders undercut Nasdaq quotes, much more than they undercut one another. The drop in the Nasdaq tick size triggered a drop in Island spreads, despite the Island tick already being very thin before Nasdaq decimalization. We also estimate a structural model of liquidity supply and find that Island limit order traders earned rents before Nasdaq decimalization. Our results suggest that perfect competition cannot be taken for granted, even on transparent open limit order books with a very thin pricing grid. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/cgi/content/abstract/56/12/2237

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