Identifying Cross-Sided Liquidity Externalities

Johannes Skjeltorp, Elvira Sojli and Wing Wah Tham
Additional contact information
Wing Wah Tham: Erasmus University Rotterdam

Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We study the relevance of the cross-sided externality between liquidity makers and takers from the two-sided market perspective. We use exogenous changes in the make/take fee structure, minimum tick-size and technological shocks for liquidity takers and makers, as experiments to identify cross-sided complementarities between liquidity makers and takers in the U.S. equity market. We find that the externality is on average positive, but it decreases with adverse selection. We quantify the economic significance of the externality by evaluating an exchange's revenue after a make/take fee change.

Keywords: Liquidity cycle, Liquidity externality; Two-sided markets; Make/take fees (search for similar items in EconPapers)
JEL-codes: G10 G14 G20 (search for similar items in EconPapers)
Date: 2013-10-03
New Economics Papers: this item is included in nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://papers.tinbergen.nl/13154.pdf (application/pdf)

Related works:
Working Paper: Identifying cross-sided liquidity externalities (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20130154

Access Statistics for this paper

More papers in Tinbergen Institute Discussion Papers from Tinbergen Institute Contact information at EDIRC.
Bibliographic data for series maintained by Tinbergen Office +31 (0)10-4088900 ().