City Research Online

Abstract

We assess the consequences for market quality and welfare of different entry regimes and exchange pricing policies, integrating a microstructure modelwith a free-entry, exchange competition model where exchanges have marketpower in technological services. Free-entry delivers superior liquidity and welfare outcomes vis-`a-vis an unregulated monopoly, but entry can be excessive or insufficient. Depending on the extent of the monopolist’s technological services undersupply compared to the first best, a planner can achieve a higher welfare controlling entry or platform fees.

Publication Type:	Article
Additional Information:	This is a pre-copyedited, author-produced version of an article accepted for publication in Review of Financial Studies following peer review. The version of record is available online at: https://doi.org/10.1093/rfs/hhab101.
Publisher Keywords:	Market Fragmentation, Welfare, Endogenous Market Structure, Platform Competition, Cournot with Free Entry, Industrial Organization of Exchanges
Subjects:	H Social Sciences > HG Finance
Departments:	Bayes Business School > Finance
SWORD Depositor:	Symplectic Administrator

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