Trading Fees and Intermarket Competition

Barbara Rindi, Marios Panayides and Ingrid Werner

No 19363, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the 2013 changes in maker-taker pricing fees implemented by BATS on its two European venues, CXE and BXE. The CXE rebate reduction deteriorates market quality and market share, whereas the BXE rebate removal and take-fee reduction improve them. We derive a model of two competing limit order books, in which large (small) stocks are characterized by investors with higher (lower) propensity to supply liquidity and by greater (lower) trading activity. Consistent with our model, we show that traders in large stocks are more reactive to rebate reductions while traders in small stocks are more reactive to take-fee reductions.

JEL-codes: D40 D47 G10 G12 G14 G18 G20 (search for similar items in EconPapers)
Date: 2024-08
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