On Thursday, October 19 at 4.40 pm, International College of Economics and Finance and International Laboratory of Financial Economics will hold the Research Seminar in Finance.
Speaker: Giovanni Cespa (Cass Business School)
Theme: "Exchange Competition, Entry, and Welfare" joint with X. Vives
Venue: Shabolovka st., 26, room 3211
Abstract: We assess the consequences for market quality and welfare of different entry regimes and exchange pricing policies in a context of limited market participation. To this end we integrate a two-period market microstructure model with an exchange competition model with entry in which the exchanges supply co-location capacity and have market power. We find that when platform entry is free, too many venues crowd the market, compared to standard welfare benchmarks. However, the capacity supply associated with the Cournot equilibrium is typically insufficient, implying that, absent regulation, whereas exchange entry may well be excessive, the associated capacity and resulting liquidity may fall short of a planner’s objective.
Everyone interested is welcome to attend!
Pass can be ordered by:
contact: Zheleznov Slava