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Please use this identifier to cite or link to this item: http://hdl.handle.net/2451/14226

Title: ELECTRONIC TRADING SYSTEMS: STRATEGIC IMPLICATIONS OF MARKET DESIGN CHOICES
Authors: Levecq, Hugues
Weber, Bruce W.
Issue Date: 3-Mar-1995
Publisher: Stern School of Business, New York University
Series/Report no.: IS-95-19
Abstract: Modern financial markets compete aggressively for trading activity and investor interest. Information technology, once a crucial element in streamlining paper flows and operations, is now a strategic resource used in attracting or retaining market liquidity. Established exchanges introduce technology to enhance their markets. New market venues challenge the status quo and rely on technology to offer diverse services to increasingly sophisticated investors. In this paper, we examine the strategic design decisions embedded in these new electronic trading systems. Design decisions are critical, as they determine the market microstructure which influences investing strategies, patterns of trade, liquidity and volatility. We propose a taxonomy of design alternatives based on six major dimensions: market structure, type of orders, order execution priority rules, price discovery rules, time stamping, and transparency. Using examples of existing systems, we discuss the potential impact of the various alternatives on the eventual attractiveness of the market to the investors.
URI: http://hdl.handle.net/2451/14226
Appears in Collections:IOMS: Information Systems Working Papers

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