Competition between exchanges: A research agenda |
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Authors: | Estelle Cantillon Pai-Ling Yin |
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Institution: | a Université Libre de Bruxelles and FNRS, Belgium and CEPR, United Kingdom;b MIT Sloan School of Management, United States |
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Abstract: | This paper describes open research questions related to the competition and market structure of financial exchanges and argues that only a combination of industrial organization and finance can satisfactorily attack these questions. Two examples are discussed to illustrate how the combination of these two approaches can significantly enrich the analysis: the “network externality puzzle”, which refers to the question of why trading for the same security is often split across trading venues, and the impact of the multi-sided character of financial exchanges on pricing and profitability. |
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Keywords: | Network effects Two-sided markets Competition Tipping Market structure Market microstructure |
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