Alternative Trading Systems: Does One Shoe Fit All?
Toni Gravelle () and
Jing Yang ()
Staff Working Papers from Bank of Canada
Keywords: Financial; markets (search for similar items in EconPapers)
JEL-codes: G10 G14 G18 (search for similar items in EconPapers)
Pages: 76 pages Abstract: This paper examines the factors that lead liquidity-motivated investors to choose the type of market structure they prefer. We assume that investors can choose between a dealership and a limit-order-book market. This study builds a theoretical model for both the dealership and order-book markets and develops a numerical method to solve the Nash equiibrium strategies of heterogeneous market participants. We find that a dealership market would be preferred by investors in an environment where customer trading is relatively thin and correlated, and by investors who are subject to relatively large liquidity shocks.
New Economics Papers: this item is included in nep-fin and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:02-33
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