A Theoretical Analysis of Institutional Investors’ Trading Costs in Auction and Dealer Markets
Bibliographic Data
| ID | 9710339 |
|---|---|
| Authors | Andy Snell (University of Edinburgh), Ian Tonks (0000-0002-4503-5149, University of Bristol) |
| Year | 2003 |
| Volume | 113 |
| Issue | 489 |
| Pages | 576-597 |
| Publication date | 2003-07-01 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | The Economic Journal (JOURNAL) |
| Journal identifiers | ISSN: 0013-0133 • E-ISSN: 1468-0297 |
| Publisher | Oxford University Press (OUP) (PUBLISHER) |
| DOI | 10.1111/1468-0297.t01-1-00146 |
| OpenAlex | W2002547054 |
| Language | EN |
| References cited | 19 |
This paper compares trading costs for institutional investors subject to liquidity shocks, in auction and dealer markets. The batch auction restricts the institutions’ ability to exploit informational advantages because of competition between institutions when they simultaneously submit orders. This competition lowers aggregate trading costs. In the dealership market, competition between traders is absent but private information is revealed by observing the flow of successive orders and so reduces aggregate trading costs. We analyse the relative effects on trading costs of competition and information revelation in the two systems and derive a parameter inequality which determines which system has lower costs
Business · Competition (biology · Dark liquidity · Economics · Exploit · High-frequency trading · Industrial organization · Market liquidity · Microeconomics · Monetary economics · Private information retrieval · Auction Theory and Applications · Corporate Finance and Governance · Financial Markets and Investment Strategies
| Citation velocity | historical |
|---|---|
| Highly cited | No |