 Alternative Trading Systems and LiquidityHans Degryse and Mark Van Achter Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven Abstract: A diversity of so-called Alternative Trading Systems (ATS) has challenged the existing traditional exchanges. This paper studies the impact of these ATS on the liquidity on the traditional financial markets using a market microstructure approach. In the United States ATS have been particularly successful in attracting trade in the Nasdaq dealer market, whereas they are less successful in competition with the NYSE. The theoretical reasoning behind this conjecture is that the agency nature of trading at the ATS allows investors to trade directly with each other without the intervention of a dealer. We argue that since continental European exchanges are typically organized as auction markets implying an agency nature of trading, the liquidity externality will prevent the auction-type ATS from breaking through and acquiring a significant market share in Europe. Only Crossing Networks may turn out to be more successful in realizing trades in Europe as they rely on the efficiency of price discovery on their primary market. Date: 2001-03 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ete:ceswps:ces0122 Access Statistics for this paper More papers in Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven |
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