Market Liquidity and Competition among Designated Market Makers
Do competition and incentives offered to designated market makers (DMMs) improve market liquidity? We employ data from NYSE Euronext Paris to show that exogenous changes in contract design lead to significant decreases in quoted and effective spreads. In particular, market liquidity increases the most for stocks with the largest increase in competition among DMMs. Our analysis shows that competition among DMMs is an important aspect of contract design, along with elements such as rebates and requirements.
BELLIA Mario;
PELIZZON Loriana;
SUBRAHMANYAM Marti G.;
YUFEROVA Darya;
2025-02-25
INFORMS
JRC117451
1526-5501 (online),
https://pubsonline.informs.org/doi/10.1287/mnsc.2022.01801,
https://publications.jrc.ec.europa.eu/repository/handle/JRC117451,
10.1287/mnsc.2022.01801 (online),
Additional supporting files
| File name | Description | File type | |
|---|
