Missing markets. Microstructure and liquidity on the London Stock Exchange

Bibliographic Data

ID9813433
AuthorsRui Esteves (0000-0002-1966-7214, Graduate Institute of International and Development Studies, corresponding author), Gabriel Geisler Mesevage (King's College London)
Year2026
Volume99
Pages101736
Publication date2026-01-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueExplorations in Economic History (JOURNAL)
Journal identifiersISSN: 0014-4983 • E-ISSN: 1090-2457
PublisherElsevier BV (PUBLISHER)
DOI10.1016/j.eeh.2025.101736
OpenAlexW7115919735
LanguageEN
Citations received1
References cited33

This paper studies the behavior of specialist dealers operating in the London Stock Exchange in the 1870s. The LSE was a free-entry exclusive dealers market, where dealers were free to choose which securities to deal in. We show that dealers concentrated their market making in the most liquid securities. A combination of adverse selection and inventory costs prevented the development of liquid markets in most securities, with dealers opting instead to provide matchmaking services. Our results call for a reappreciation of the liquidity of the London market and offer a new interpretation of stylized facts about the Victorian investor behavior

Adverse selection · Market liquidity · Market maker · Stock (firearms · Stock exchange · Stock market · Stylized fact · Art History and Market Analysis · Financial Markets and Investment Strategies · Historical Economic and Social Studies

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