Price Discovery and Convergence in Fragmented Securities Markets

Download or read book Price Discovery and Convergence in Fragmented Securities Markets written by Benjamin Clapham and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies price discovery and price convergence in securities trading within a fragmented market environment where stocks are traded on multiple venues. Although alternative venues currently increase their market share, trading on these venues instantly dries out in case the dominant market switches to a call auction. In this situation, alternative markets await and adopt the official price signal of the dominant market although prices on these venues indicate price discovery. This phenomenon remains persistent at different levels of market fragmentation, indicating that alternative trading venues fully accept the price leadership role of the dominant market during call auctions, no matter their own market share.