The Effect of Crossing-Network Trading on Dealer Market's Bid-Ask Spreads

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.

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Year of publication:	2006
Authors:	Gresse, Carole
Institutions:	Université Paris-Dauphine (Paris IX)
Subject:	Bid-ask spread \| Fragmentation \| Liquidity \| Dealer markets \| Crossing networks \| Alternative trading systems \| Transaction costs \| Risk sharing \| Stocks

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Series:	Economics Papers from University Paris Dauphine.
Type of publication:	Book / Working Paper
Notes:	Published in European Financial Management, 2006, Vol. 12, no. 2. pp. 143-160.Length: 17 pages
Classification:	G12 - Asset Pricing ; G14 - Information and Market Efficiency; Event Studies ; G15 - International Financial Markets ; G19 - General Financial Markets. Other
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011093892