Research projects on New Financial Economy (e-finance)

The technological mutations of recent years have profoundly disrupted the design and structure of stock markets with the development and multiplication of electronic platforms: electronic communication networks (ECN) and alternative transaction systems (ATS). These technological innovations have brought about serious changes in the access to and processing of financial information, in brokerage practices, and in methods of transaction. They have been accompanied by a substantial reduction in the commission fees charged on stock transactions and by changes in classical practices on the floors of exchanges (for example, the use of decimals in the prices quoted on the Toronto and NYSE exchanges). Meanwhile, we observe a fragmentation of stock markets which, despite an explosion in the volume of transactions, has reduced the average size of each transaction. This fragmentation has a significant impact on the liquidity and volatility of markets as well as on total transaction costs (Bessembinder, 2002; Jones and Lipson, 2001). On the other hand, not only have several firms listed on Canadian exchanges decided to register on American markets but there is also an increasingly noticeable drop in the market share of Canadian exchanges for trade on inter-listed Canadian stocks and This phenomenon reflects the competition between different stock markets to execute transactions in this era of electronic finance. This competitiveness is now facilitated by technological means allowing the quasi-virtual establishment of new markets (Instinet, Island, Posit), markets to which a number of institutional investors are directing more and more transaction orders. These developments raise several questions about the positioning of Canadian stock markets in the face of competition from other traditional exchanges (NASDAQ, NYSE, AMEX) as well as from new transaction platforms. The research programme is aimed at answering several questions related to the effects of e-finance on stock markets. Competitiveness of Canadian Financial Markets in the Era of the New Economy ") will take up the question of implicit transaction costs (impact costs, costs linked to search for liquidity on the market, opportunity costs of total or partial failure to execute an order) which are by far higher than the explicit costs charged as commission fees. In addition to the classical where nil returns observed on stocks and shares constitute an indication that, for the smallest investor, the threshold of transaction costs is not being reached, neither when buying or selling. This approach will allow us to examine three factors: level of total costs for stock …