Speed segmentation on exchanges: Competition for slow flow
Michael Mueller and
Journal of Financial Markets, 2022, vol. 58, issue C
In 2015, a Canadian stock exchange, TSX Alpha Exchange, implemented a speed bump for marketable orders and an inverted fee structure as part of a redesign. We find evidence of mild improvements in market quality after the redesign, and we do not find that Alpha appreciably segmented retail order flow away from other Canadian exchanges. For high-priced stocks, Alpha's users trade off improvements in execution size against larger effective spreads after the redesign and adjust their trading behavior in a manner consistent with this trade-off. The findings suggest that speed bumps may enable exchanges to compete for latency-insensitive orders.
Keywords: Financial markets; Market structure and pricing (search for similar items in EconPapers)
JEL-codes: G14 G24 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:58:y:2022:i:c:s1386418121000148
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