Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153200
Authors: 
Cantillon, Estelle
Yin, Pai-Ling
Year of Publication: 
2007
Series/Report no.: 
ECB Working Paper 766
Abstract: 
In a famous episode of financial history which lasted over eight years, the market for the future on the Bund moved entirely from LIFFE, a London-based derivatives exchange, to DTB, a Frankfurt-based exchange. This paper studies the determinants of the observed dynamics, using a novel panel dataset that contains individual trading firms' membership status at each exchange together with other firms characteristics, and pricing, marketing and product portfolio strategies by each exchange. Our data allows us to distinguish between different explanations for the observed phenomenon. Our results indicate that the main driver was a "market coverage" effect: thanks to the combination its electronic market structure and EU-wide access deregulation, DTB increased the relevant size of the market for exchange members and disproportionately attracted those firms who originally did not exist or used to submit their orders through a broker. Differential liquidity and product portfolio strategies by the exchanges played a secondary role.
Subjects: 
adoption cost
Bund
electronic trading
Exchange competition
network effect
open outcry
tipping
JEL: 
G21
G28
L13
L43
Document Type: 
Working Paper

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