Liquidity Supply across Multiple Trading Venues

Laurence Lescourret () and Sophie Moinas
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Laurence Lescourret: ESSEC Business School
Authors registered in the RePEc Author Service: Laurence Daures

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Abstract: Financial markets are increasingly fragmented. How to supply liquidity in this environment? Using an inventory model, we analyze how two strategic intermediaries compete across two venues that can be hit simultaneously by liquidity shocks of equal or opposite signs. Although order flow is fragmented ex-ante, we show that intermediaries might strategically consolidate it ex-post, improving global liquidity. We also fi nd that local spreads co-move together across venues as a result of global inventory management. Using Euronext proprietary data, we uncover new evidence of inventory control across venues and fi nd that local spreads vary in a way uniquely predicted by the model.

Keywords: Market fragmentation; multi-venue market-making; bid-ask spreads (search for similar items in EconPapers)
Date: 2015-03-15
New Economics Papers: this item is included in nep-mst
Note: View the original document on HAL open archive server: https://essec.hal.science/hal-01137813v1
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Liquidity Supply across Multiple Trading Venues (2015)
Working Paper: Liquidity Supply across Multiple Trading Venues (2015)
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