Trading Fees and Intermarket Competition

Marios Panayides, Barbara Rindi and Ingrid M.Werner

No 1751, BAFFI CAREFIN Working Papers from BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy

Abstract: We model an order book with liquidity rebates (make fees) and trading fees (take fees) that faces intermarket competition, and use the models insights to explain changes in market quality and market shares following changes in make-take fees. As predicted by our model, we document that fee changes by one venue a affect market quality and market shares for all venues that compete for order flow. Furthermore, we document cross-sectional differences in changes in market quality and market shares following a simultaneous decrease in both make and take fees consistent with traders in large (small) capitalization stocks being more sensitive to the change in make (take) fees.

Keywords: Trading Fees; Maker-Taker Pricing; Intermarket Competition; Limit Order Book (search for similar items in EconPapers)
JEL-codes: D40 D47 G10 G12 G14 G18 G20 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2017
New Economics Papers: this item is included in nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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