Bank ownership of multilateral trading facilities and implications for historical exchanges: An industrial economics approach

Delphine Lahet and Anne-Gaël Vaubourg

Economic Modelling, 2017, vol. 65, issue C, 9-17

Abstract: The aim of this paper is to address bank ownership in Multilateral Trading Facilities (MTFs) and its implications for historical exchanges. We propose an oligopoly model with network effects to account for an exchange industry that consists of two MTFs and an historical exchange. Based on the observation that banks are both owners and clients of MTFs, we examine banks' incentive to influence the pricing policy of MTFs. We show that when brokerage and trading activities are particularly important for banks' revenue relative to their profit as MTF operators, certain market outcomes may emerge whereby both MTFs include banks' interest as clients in their objective function. We also demonstrate that accounting for banks' interest in MTFs' objective function acts as a competitive device that reduces the price and the profitability of the historical exchange.

Keywords: Banks; Shareholding; Historical exchanges; Multilateral trading facilities; Competition (search for similar items in EconPapers)
JEL-codes: G10 G23 G24 L10 L11 L22 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999317306181
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Bank ownership of multilateral trading facilities and implications for historical exchanges: An industrial economics approach (2017)
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:eee:ecmode:v:65:y:2017:i:c:p:9-17

DOI: 10.1016/j.econmod.2017.04.014

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().