Trading Fees and Intermarket Competition

Marios A. Panayides, Barbara Rindi and Ingrid M. Werner
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Marios A. Panayides: University of Pittsburgh
Barbara Rindi: Bocconi University
Ingrid M. Werner: Ohio State University

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: We model an order book with liquidity rebates (make fees) and trading fees (take fees) that faces intermarket competition, and use the model's 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 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.

JEL-codes: D40 D47 G10 G12 G14 G18 G20 (search for similar items in EconPapers)
Date: 2017-01
New Economics Papers: this item is included in nep-mst
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2017-03

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