Equity Trading and the Allocation of Market Data Revenue

Caglio, Cecilia; Mayhew, Stewart

doi:10.17016/feds.2012.65

Cited by 3 publications

(3 citation statements)

References 22 publications

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“…Usually, an exchange with large trading volume could generate more revenue from data feeding fee. For example, in U.S. equity market allocation of the revenues from selling consolidated data is positively related to an exchange's market share of total trading volume (see more details from Caglio and Mayhew (2012)). Exchange with large trading volume can also attract more listings due to the positive externalities of liquidity.…”

Section: So Far I Have Shown That When a New Fast Speed Technology Ismentioning

confidence: 99%

Why Do Stock Exchanges Compete on Speed, and How?

Wang

2018

SSRN Journal

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Section: So Far I Have Shown That When a New Fast Speed Technology Ismentioning

confidence: 99%

Why Do Stock Exchanges Compete on Speed, and How?

Wang

2018

SSRN Journal

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“…For securities listed on the NYSE, American Stock Exchange or a regional exchange, data distribution is governed by the CTA Plan and the CQ Plan. For Nasdaq securities, data distribution is governed by the Nasdaq UTP Plan (Caglio and Mayhew, 2008). …”

Section: Notesmentioning

confidence: 99%

MiFID, Reg NMS and competition across trading venues in Europe and the USA

Petrella

2010

Journal of Financial Regulation and Compliance

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PurposeThe purpose of this paper is to evaluate how markets in financial instruments directive (MiFID) and regulation national market system (Reg NMS) affect the competition for order flow among trading venues in, respectively, Europe and the USA.Design/methodology/approachThe paper examines the differences between MiFID and Reg NMS and provides, based on market microstructure principles, insights as to their likely impact on European and the US securities markets.FindingsAlthough MiFID and Reg NMS share the common objective of enhancing competition in securities markets, they adopt different provisions with respect to three issues that strongly influence the competition for order flow among trading venues. Specifically, some of the provisions set forth by the US regulation with respect to the best execution duty, the consolidation of market data and the disclosure of execution quality information appear to be more effective, compared to the European Union ones, in strengthening competition for order flow among trading venues.Research limitations/implicationsRegulatory factors can only partly explain the current structure of the European and US securities markets. Technology and heterogeneity in traders' demand are other important factors that concur in shaping the European and US markets.Practical implicationsThe degree of competition for order flow among trading venues depends on how regulations define the best execution duty, the availability of updated and consolidated pre‐trade (i.e. quotations) and post‐trade (i.e. transactions) information and the efficiency of post‐trading infrastructures.Originality/valueThe paper addresses issues not yet investigated and provides valuable insights for financial intermediaries, incumbent and prospective exchanges as to the competition in the securities industry, and to regulators as to the likely impact of the new regulations.

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“…Focusing on three distinct periods in which the PSX operated under di®erent market structures this study addresses three questions: (a) what are the bene¯ts to size precedence, (b) how does an exchange that rewards size maintain 1% of trading for volume for a seven-year period, and (c) what systemic environment b Brogaard et al (2015) use the optional speed upgrade at NASAQ as a natural experiment and¯nd that colocation services and improved liquidity bene¯t fast and slow market participants. c Caglio & Mayhew (2016)¯nd evidence that pro¯t sharing leads to smaller orders, but allocation algorithms do not have an impact on spreads. d Brogaard et al (2014) suggest that HFT activity improves price e±ciency.…”

Section: Introductionmentioning

confidence: 99%

Size Precedence and Share Volume: The Case of the PSX Exchange

Jurich

2020

J. Fin. Mngt. Mar. Inst.

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Most equity exchanges operate with a price-time priority market structure. Using a natural experiment, this study examines the ability of an exchange to attract share volume when size is the secondary precedence rule. In 2010, the NASDAQ OMX Group, Inc. and the Philadelphia Exchange launched the PSX equity exchange with a price-size pro-rata allocation market model. When operating under a pro-rata allocation algorithm, PSX is able to attract more volume than during a price-time regime. Systemic factors are imperative, as there is substantial evidence that the PSX attracts volume in times of heightened market volatility, but PSX volume decreases when market returns are positive. Competition is increasingly important in a fragmented market. There is evidence that order routing fees and the prevalence of off-exchange trading are significant factors in the ability of the PSX to capture market share. The results are of interest to market participants, regulators, and exchange officials.

show abstract

Equity Trading and the Allocation of Market Data Revenue

Cited by 3 publications

References 22 publications

Why Do Stock Exchanges Compete on Speed, and How?

Why Do Stock Exchanges Compete on Speed, and How?

MiFID, Reg NMS and competition across trading venues in Europe and the USA

Size Precedence and Share Volume: The Case of the PSX Exchange

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