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Title | Alternative Trading Systems: Does One Shoe Fit All? |
Author(s) | Nicolas Audet, Toni Gravelle, and Jing Yang |
Type | Working Paper 2002-33 |
Date of publication |
November 2002 |
Language | English |
Abstract |
This paper examines the factors that lead liquidity-motivated investors to choose the type of market structure they prefer. We assume that investors can choose between a dealership and a limit-order-book market. This study builds a theoretical model for both the dealership and order-book markets and develops a numerical method to solve the Nash equiibrium strategies of heterogeneous market participants. We find that a dealership market would be preferred by investors in an environment where customer trading is relatively thin and correlated, and by investors who are subject to relatively large liquidity shocks. |
Bank topic index |
Financial markets |
JEL classification |
G10, G14, G18 |
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