EconPapers    
Economics at your fingertips  
 

Liquidity provider incentives in fragmented securities markets

Benjamin Clapham, Peter Gomber, Jens Lausen and Sven Panz

Journal of Empirical Finance, 2021, vol. 60, issue C, 16-38

Abstract: We test theoretical predictions of changes in make/take fees in a setting with isolated make rebates for liquidity providers on a single trading venue (Xetra) by examining the impact on both Xetra and the overall market. The rebates lead to higher quoted depth but do not change bid–ask spreads or trading volume on Xetra. For the overall market, no change in trading volume or liquidity is observable. This shows that market participants redistribute their orders to the venue offering fee rebates rather than providing additional liquidity to the overall market. Consequently, the impact of fee changes depends on the setting.

Keywords: Liquidity; Trading volume; Market fragmentation; Liquidity provider incentives; Exchange fees (search for similar items in EconPapers)
JEL-codes: G10 G14 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927539820300839
Full text for ScienceDirect subscribers only

Related works:
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:empfin:v:60:y:2021:i:c:p:16-38

DOI: 10.1016/j.jempfin.2020.11.002

Access Statistics for this article

Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff

More articles in Journal of Empirical Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2022-06-04
Handle: RePEc:eee:empfin:v:60:y:2021:i:c:p:16-38