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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/14336
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| Title: | DEMAND FOR OFF-EXCHANGE TRADING SYSTEMS: TRADING PREFERENCES OF
INVESTORS ON THE LONDON STOCK EXCHANGE |
| Authors: | Clemons, Eric K.
Weber, Bruce W. |
| Issue Date: | 15-May-1992 |
| Publisher: | Stern School of Business, New York University |
| Series/Report no.: | IS-92-20 |
| Abstract: | The London Stock Exchange (LSE) faces rising pressure in its efforts to
maintain its position as a favored market of institutional fund managers
and professional investors. Customers are satisfied with the current
state of the LSE market, but member firms are pricing institutional
brokerage and market making services below economic cost. The LSE's
position will be significantly damaged when the effective subsidy ends,
and commissions and dealing spreads reflect the costs incurred by
members firms. Competition in the supply of trading services has
increased, and a range of alternative, off-exchange trading systems
could draw order flow away from the Exchange market. These trading
mechanisms provide order matching, crossing of basket and portfolio
trades, and reduce investors' commissions and trading spread costs. Fund
managers in the U.S. are using the systems more actively, and the result
has been an erosion of the position of the New York Stock Exchange. The
LSE's customers are also using an expanding range of portfolio
management techniques, many of which require low-cost trading, and do
not demand immediate order execution, as traditionally provided by
London's market makers. The Exchange needs to respond to the changes in
fund managers' demand for trading services, and to the growing
competition in the supply of off-exchange trading services. Enhancements
to the existing LSE market structure are the best response to these threats. |
| URI: | http://hdl.handle.net/2451/14336 |
| Appears in Collections: | IOMS: Information Systems Working Papers
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