Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/87256 
Year of Publication: 
2013
Series/Report no.: 
Tinbergen Institute Discussion Paper No. 13-154/IV/DSF63
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
Abstract: 
We study the relevance of the cross-sided externality between liquidity makers and takers from the two-sided market perspective. We use exogenous changes in the make/take fee structure, minimum tick-size and technological shocks for liquidity takers and makers, as experiments to identify cross-sided complementarities between liquidity makers and takers in the U.S. equity market. We find that the externality is on average positive, but it decreases with adverse selection. We quantify the economic significance of the externality by evaluating an exchange's revenue after a make/take fee change.
Subjects: 
Liquidity cycle
Liquidity externality
Two-sided markets
Make/take fees
JEL: 
G10
G20
G14
Document Type: 
Working Paper

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