Trade execution costs and disintermediated order crossing systems on the London Stock Exchange
نویسنده
چکیده
Abstmct. l’he growth of alternative trading systems that compete with established stock markets will have profound fleets on many securities exchanges and their nltmlber jhs. New screen-based markets match investors ’ orders directly without the involvement of a broker or a dealer, saving intermediation costs such as the bid-ask spread and broker commission costs. Competing market makers operating on the London Stock Exchange’s SEAQ market provide an intermediated “quotedriven ” trading mechanism, but the approaching roll-out of several alternatives will provide investors with new opportunities to trade without market makers. A model of order arrival, information change, and trading in a competing dealer market based on SEAQ is used to examine the consequences of “disintermediated” trading systems. The results indicate lowcost trading systems reduce dealing margins and the role of intermediaries. While alternative trading systems lessen the transactions costs borne by some traders, those requiring immediate execution and dealer intermediation may pay more in-future marketplaces.
منابع مشابه
Crossing Networks and Dealer Markets: Competition and Performance
This paper studies the interaction between dealer markets and a relatively new form of exchange, passive crossing networks, where buyers and sellers trade directly with one another. We find that the crossing network is characterized by both positive ~“liquidity”! and negative ~“crowding”! externalities, and we analyze the effects of its introduction on the dealer market. Traders who use the dea...
متن کاملSome Determinants of Corporate Financing Decisions: Evidence from the Listed Companies in Tehran Stock Exchange
The aim of this empirical study is to explore the trade-off model and pecking order model of capital structure. The investigation is performed using panel data procedures for a sample of 76 firms listed in Tehran Stock Exchange during 2007-2010.The study employs OLS regression model in examining the capital structure of firms in Iran. The study employs variables reflecting differing theoretical...
متن کاملTransparency & Quality: The Impact of Increasing Limit Order Book levels on Tehran Stock Exchange
Objective: One of the common tools used to make pre-trade transparency in financial markets is the Limit Order Book. In spite of several researches on the Limit Order Book, there is no consensus about the impact of increasing pre-trade transparency on market quality. Increasing the number of Limit Order Book levels from 3 to 5 levels, in May 2017, for online traders in Tehran Stock Exchange, ga...
متن کاملInvestigating the Effect of Information on Conservatism in Financial Statements of Accepted Companies in the Tehran Stocks' Exchange
Information asymmetry is a negative event that gives manager incentives to use his private information to attempt transferring wealth from investors by overstating financial performance and consequently, stock prices during his tenure at the firm. The manipulations generate agency costs. Conservative reporting is a mechanism that reduces the managers’ ability to manipulate and overstate financi...
متن کاملSETS, Arbitrage Activity, and Stock Price Dynamics
This paper provides an empirical description of the relationship between the trading system operated by a stock exchange and the transaction costs faced by heterogeneous investors who use the exchange. The recent introduction of SETS in the London Stock Exchange provides an excellent opportunity to study the impact of an electronic trading system upon transaction costs and the time taken to car...
متن کامل