Market Liquidity and Competition Among Designated Market Makers

Mario Bellia, Loriana Pelizzon (), Marti G. Subrahmanyam () and Darya Yuferova ()
Additional contact information
Loriana Pelizzon: SAFE, Goethe University Frankfurt, 60323 Frankfurt am Main, Germany; Ca’ Foscari University of Venice, 30123 Venice, Italy; CEPR, London EC1V 0DX, United Kingdom
Marti G. Subrahmanyam: Leonard N. Stern School of Business, New York University, New York, New York 10012; NYU Shanghai, Shanghai 200122, China
Darya Yuferova: Norwegian School of Economics (NHH), 5045 Bergen, Norway

Management Science, 2025, vol. 71, issue 1, 184-201

Abstract: Do competition and incentives offered to designated market makers (DMMs) improve market liquidity? We employ data from NYSE Euronext Paris to show that exogenous changes in contract design lead to significant decreases in quoted and effective spreads. In particular, market liquidity increases the most for stocks with the largest increase in competition among DMMs. Our analysis shows that competition among DMMs is an important aspect of contract design, along with elements such as rebates and requirements.

Keywords: designated market makers; DMMs; liquidity provision (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.2022.01801 (application/pdf)

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:inm:ormnsc:v:71:y:2025:i:1:p:184-201

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().