Arbeitspapier
Fragmentation and Strategic Market-Making
Information technology, infrastructure enhancement, and arbitrage strategies all contributeto link trading venues in fragmented markets. Our paper highlights a new cross-market linking channel: the interdependence of liquidity providers' inventory costs. We use a two-venue duopoly model involving strategic risk-averse market-makers. Costs to provide immediacy depend on market-makers' inventory aggregated across venues, implying that absorbing a shock in one venue simultaneously changes marginal costs in all other venues. Moreover, market-makers strategically choose which shock(s) to absorb. These two forces may lead to competitive prices and enhanced liquidity. Using Euronext proprietary data, we uncover evidence for these crossmarket inventory cost linkages.
- Sprache
-
Englisch
- Erschienen in
-
Series: EconPol Working Paper ; No. 15
- Klassifikation
-
Wirtschaft
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Lescourret, Laurence Daures
Moinas, Sophie
- Ereignis
-
Veröffentlichung
- (wer)
-
ifo Institute - Leibniz Institute for Economic Research at the University of Munich
- (wo)
-
Munich
- (wann)
-
2018
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Lescourret, Laurence Daures
- Moinas, Sophie
- ifo Institute - Leibniz Institute for Economic Research at the University of Munich
Entstanden
- 2018
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