Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/88731
Authors: 
Gomber, Peter
Sagade, Satchit
Theissen, Erik
Weber, Moritz Christian
Westheide, Christian
Year of Publication: 
2013
Series/Report no.: 
SAFE Working Paper Series 35
Abstract: 
Advances in technology and several regulatory initiatives have led to the emergence of a competitive but fragmented equity trading landscape in the US and Europe. While these changes have brought about several benefits like reduced transaction costs, regulators and market participants have also raised concerns about the potential adverse effects associated with increased execution complexity and the impact on market quality of new types of venues like dark pools. In this article we review the theoretical and empirical literature examining the economic arguments and motivations underlying market fragmentation, as well as the resulting implications for investors' welfare. We start with the literature that views exchanges as natural monopolies due to presence of network externalities, and then examine studies which challenge this view by focusing on trader heterogeneity and other aspects of the microstructure of equity markets.
Subjects: 
Market Structure
Competition
Fragmentation
Liquidity
Market Quality
JEL: 
G10
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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