Working Paper: CEPR ID: DP1581
Authors: Hans Degryse
Abstract: Since 1990, London?s SEAQ International attracts considerable trading volume in Belgian equities. This paper uses transaction, quotation and limit order book data to investigate competition between the Brussels CATS market and SEAQ International. It focuses in more detail on the liquidity (indirect costs) measured by the quoted and effective bid-ask spread. CATS outweighs SEAQI for both measures. The effective spread is substantially smaller than the quoted spread. The CATS effective spread shows a U-shaped form. This is in line with the different market micro-structure models. Total trading costs on CATS are lower (higher) for small (large) trade sizes.
Keywords: cost of trading; shares; Brussels stock exchange; SEAQ International
JEL Codes: G15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| trading costs (F12) | market structures (D49) |
| market characteristics (D49) | trading costs (F12) |
| trade size (F19) | indirect trading costs (F16) |
| Brussels CATS (Y91) | indirect trading costs (F16) |
| London SEAQ (G10) | indirect trading costs (F16) |
| trade size (F19) | effective spread (E43) |
| effective spread (E43) | quoted spread (Y60) |