Luận Văn Competition among exchanges Does multiple listing affect trading costs on options markets? by Wang,

Competition among exchanges: Does multiple listing affect trading costs on options markets?

This paper studies the effects of competition among options exchanges on trading costs. Prior to 1990, exchanges were granted monopoly power over the options contracts they marketed. After 1990, exchanges were allowed to compete over the whole universe of option contracts, both those already created and those yet to be introduced. I use this unique experiment to examine the impact of competition on trading costs. I find that options that are traded on several exchanges have spreads that are on average 14% lower than those of single listed options. This finding survives attempts to control for differences in the characteristics of single listed and multiple listed options, the simultaneity of spreads and volume, and the endogeneity of the multiple listing decision. However, the liquidity externality creates market power for the dominant exchange listing a particular option. I find that the spreads on a newly listed option widen over time, increasing as most of the trading volume of a particular contract becomes concentrated on a single exchange. Nonetheless, I find that market power is disciplined by competition from the exchange(s) where the remaining volume is traded; spreads on multiple listed options trading primarily on a dominant exchange are not as wide as spreads for single listed options.
[TABLE="class: citation"]
[TR]
[TH]Format:[/TH]
[TD]Dissertation[/TD]
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[TR]
[TH]Author(s):[/TH]
[TD]Wang, Elizabeth Xiao-Ru[/TD]
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[TR]
[TH]Published:[/TH]
[TD]2000[/TD]
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[TR]
[TH]Language:[/TH]
[TD]English[/TD]
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