Improving liquidity through efficient stock market structure and operational design

Pankaj Jain

Journal of Financial Transformation, 2006, vol. 18, 151-159

Abstract: This study is an analysis of the secondary market liquidity on equity markets around the world. The role of operational design of stock exchanges in enhancing liquidity is assessed. The market structure within which exchanges operate is also shown to affect the optimal operational design and liquidity. Narrower tick sizes, designated market makers, centralized limit order books, computerized trading, and strong shareholder rights index all improve liquidity directly and indirectly. Interaction effects among these features result in hybrid auction-dealer systems outperforming pure limit order books or quote-based dealer systems in the race for better liquidity.

Keywords: liquidity; international; stock exchange; trading mechanism (search for similar items in EconPapers)
JEL-codes: G10 G12 G15 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:jofitr:1278

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