Arbeitspapier
Is BEST really better? Internalization of orders in an open limit order book
This paper studies the market quality of an internalization system which is designed as part of an open limit order book (the Xetra system operated by Deutsche Börse AG). The internalization sys-tem (Xetra BEST) guarantees a price improvement over the inside spread in the Xetra order book. We develop a structural model of this unique dual market environment and show that, while adverse selection costs of internalized trades are significantly lower than those of regular order book trades, the realized spreads (the revenue earned by the suppliers of liquidity) is significantly larger. The cost savings of the internalizer are larger than the mandatory price improvement. This suggests that internalization can be profitable both for the customer and the internalizer.
- Sprache
-
Englisch
- Erschienen in
-
Series: CFS Working Paper ; No. 2011/03
- Klassifikation
-
Wirtschaft
General Financial Markets: General (includes Measurement and Data)
- Thema
-
Internalization
Execution Quality
Adverse Selection Costs
Wertpapierhandel
Elektronisches Handelssystem
Aktienmarkt
Bid-Ask Spread
Adverse Selection
Theorie
Deutschland
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Grammig, Joachim G.
Theissen, Erik
- Ereignis
-
Veröffentlichung
- (wer)
-
Goethe University Frankfurt, Center for Financial Studies (CFS)
- (wo)
-
Frankfurt a. M.
- (wann)
-
2011
- Handle
- URN
-
urn:nbn:de:hebis:30-91466
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Grammig, Joachim G.
- Theissen, Erik
- Goethe University Frankfurt, Center for Financial Studies (CFS)
Entstanden
- 2011
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