Endogenous bourse structures

Marta Faias and Jaime Luque

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: We propose a novel approach to the market microstructure theory, where a bourse is a club that facilitates asset trading among its members. Under the new perspective of club theory, we provide an equilibrium setting where traders must belong to at least one bourse to trade assets. For this bourse economy, we show that equilibrium exists generically, and give positive predictions regarding the formation of a large unique bourse, and/or a bourse with complete markets. We also give examples that illustrate how traders’ attributes and bourse formation costs explain bourse size and composition, market incompleteness, and multiple memberships.

Keywords: Bourse; structures; Traders'; complementarities; Dark; liquidity; pools; Demutualization; Market; incompleteness; Bourse; formation; cost (search for similar items in EconPapers)
JEL-codes: D52 D53 G12 G14 G15 G18 (search for similar items in EconPapers)
Date: 2012-04
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Citations: View citations in EconPapers (1)

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