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A Theory of Stock Exchange Competition and Innovation: Will the Market Fix the Market? / Eric Budish, Robin S. Lee, John J. Shim.
- Format:
- Book
- Author/Creator:
- Budish, Eric.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w25855.
- NBER working paper series no. w25855
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Theory of Stock Exchange Competition and Innovation
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2019.
- Summary:
- Will stock exchanges innovate to address latency arbitrage and the arms race for speed? This paper models how exchanges compete in the modern electronic era and how this shapes incentives for market design innovation. In the status quo, exchange trading fees are competitive while exchanges earn economic rents from selling speed. These rents create a wedge between private and social incentives to innovate, and support the persistence of an inefficient market design in equilibrium of a market design adoption game. We discuss implications for policy and insights for the literatures on market design, innovation, and platforms.
- Notes:
- Print version record
- May 2019.
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