The Economics of Exchanges
The consolidation process which has occurred during the last few years has changed the morphology of the exchange industry in a substantial way, and also effected a widespread transformation of the business model of major exchanges. We noted in Chapter 2 that business diversification is a strategic choice in an industry landscape where exchanges’ revenues are under pressure. To this end, exchanges have attempted to counteract the adverse effects of both competition and economic downturns on trading revenues. The most striking example of this is the combination of cash market and derivatives market activities — something which constitutes the case for almost all of the exchanges involved in mergers, given the countercyclical nature of derivatives trading.
KeywordsTrading Volume Platform Operator Capital Endowment Trading Service Security Exchange
Unable to display preview. Download preview PDF.
- 1.For an excellent review of the most relevant contributions to this strand of research, in particular with reference to ownership models and the critical factors affecting efficiency, see R. Lee (2011) Running the World’s Markets: The Governance of Financial Infrastructure (Princeton University Press).Google Scholar