EconPapers    
Economics at your fingertips  
 

Regulation and Security Design in Concentrated Markets

Ana Babus and Kinda Hachem

No 28764, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Regulatory debates about centralized trading assume security design is immune to market structure. We consider a regulator who introduces an exchange to increase liquidity, understanding that security design is endogenous. For a given security, investors would like to trade in a larger market and, for a given market structure, they would like to trade a safer security. We show that financial intermediaries design riskier securities after the exchange is introduced, even when the exchange leads to the origination of safer underlying assets. The results reflect a relative dilution of investor market power and motivate coordinated policies to improve investor welfare.

JEL-codes: D47 D86 G23 (search for similar items in EconPapers)
Date: 2021-05
New Economics Papers: this item is included in nep-reg
Note: AP CF ME
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Published as Babus, Ana & Hachem, Kinda, 2021. "Regulation and security design in concentrated markets," Journal of Monetary Economics, Elsevier, vol. 121(C), pages 139-151.

Downloads: (external link)
http://www.nber.org/papers/w28764.pdf (application/pdf)

Related works:
Journal Article: Regulation and security design in concentrated markets (2021) Downloads
Working Paper: Regulation and Security Design in Concentrated Markets (2021) Downloads
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:nbr:nberwo:28764

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w28764

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2025-07-19
Handle: RePEc:nbr:nberwo:28764