z-logo
Premium
Competing on Speed
Author(s) -
Pagnotta Emiliano S.,
Philippon Thomas
Publication year - 2018
Publication title -
econometrica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 16.7
H-Index - 199
eISSN - 1468-0262
pISSN - 0012-9682
DOI - 10.3982/ecta10762
Subject(s) - economics
We analyze trading speed and fragmentation in asset markets. In our model, trading venues make technological investments and compete for investors who choose where and how much to trade. Faster venues charge higher fees and attract speed‐sensitive investors. Competition among venues increases investor participation, trading volume, and allocative efficiency, but entry and fragmentation can be excessive, and speeds are generically inefficient. Regulations that protect transaction prices (e.g., Securities and Exchange Commission trade‐through rule) lead to greater fragmentation. Our model sheds light on the experience of European and U.S. markets since the implementation of Markets in Financial Instruments Directive and Regulation National Markets System.

This content is not available in your region!

Continue researching here.

Having issues? You can contact us here