The impact of trading fragmentation in securities markets

Giovanni Cespa

Chapter 10 in Handbook of Financial Integration, 2024, pp 224-238 from Edward Elgar Publishing

Abstract: Over the past two decades, in several countries around the world technological progress and the actions of governments and regulators have worked to foster competition among trading venues, spurring market fragmentation. As a result, today, large companies’ stocks commonly trade in different venues. This process has likely contributed to reduce the market power wielded by incumbent exchanges, lowering explicit trading costs and favoring some market participants. At the same time, it has, however, generated several side effects that testify to the fact that the transition toward an alternative market structure, in which competition among trading service providers is rampant, is still ongoing. This chapter discusses some of these effects and assesses their impact for standard measures of market liquidity, market stability, and market participants’ welfare.

Keywords: Economics and Finance (search for similar items in EconPapers)
Date: 2024
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