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Author: | Bessembinder, H. Venkataraman, K. |
Title: | Does an electronic stock exchange need an upstairs market? |
Journal: | Journal of Financial Economics
2004 : JUL, VOL. 73:1, p. 3-36 |
Index terms: | Stock markets Trading Stock exchanges France |
Language: | eng |
Abstract: | This paper examines the Paris Bourse, whose electronic limit order market (hereafter as: mrk./mrks.) closely resembles the downstairs mrks. envisioned by theorists, to test several theoretical predictions on upstairs trading. There is direct evidence supporting the prediction (by Grossman) that upstairs brokers lower execution costs by tapping into unexpressed liquidity (here as: liq). Consistent with prior analyses, the Paris data also support the hypothesis (by Seppi) that upstairs brokers certify trades as uninformed. In addition, there is evidence found that participants in stocks with less restrictive crossing rules agree to outside-the-quote executions for more difficult trades and at times when downstairs liq. is lacking. |
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