By Jutta Dönges

ISBN-10: 3663077349

ISBN-13: 9783663077343

ISBN-10: 3824474263

ISBN-13: 9783824474264

The proliferation of other buying and selling platforms has elevated pageant for order circulate in monetary markets considerably and renewed the controversy on fragmentation as opposed to consolidation. marketplace microstructure types that learn liquidity-based intermarket festival usually convey a number of equilibria, making it tricky to figure out even if fragmentation or consolidation of order circulation will occur.

Jutta A. Dönges applies the lately built concept of world video games that

reduces multiplicity of equilibria in coordination video games to a version of intermarket festival and demonstrates the life of a distinct equilibrium below particularly basic stipulations. the writer investigates even if and less than which situations substitute buying and selling structures, really crossing networks, can co-exist with tested markets or maybe exchange them and explores how the advent of a crossing community impacts both

monopolistic and aggressive broker markets and the industry participants'

behavior.

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**Additional resources for Competition for Order Flow and the Theory of Global Games: The impact of alternative trading systems on securities markets**

**Example text**

17 The multiplicity of equilibria is a key characteristic of coordination games; a class of games that describes a lot of economic problems such as models of new technology adaption and standardization 18, models of bank runs 19 and currency crises 2o , macroeconomic models of Keynesian coordination failures 21 . In coordination games, players' beliefs seem to be indeterminate in the sense that one set of beliefs yields a different outcome compared to the outcome of another set of beliefs. Beliefs and outcomes are consistent, however, how players form their beliefs about other players' actions that result in the realization of a certain equilibrium is not explained in the game, nor is there any explanation for shifts in beliefs that lead to the realization of another equilibrium.

607 In an auction market, orders are matched by intermediaries who do not partiCipate in trading but act as agents for their customers. In electronic auction markets, the intermediary is replaced by a computer who does the matching. Contrarily, dealers in a dealer market are actively involved in trading by buying or selling assets from their own account, see section 1111 For example, on October 20, 1997, the London Stock Exchange (LSE) introduced an open electronic limit order book with automated trade execution features, and on November 28, 1997, the Deutsche BOrse in Frankfurt introduced Xetra, an order-driven electronic trading system, see DomowitzlSteil (1999), p.

Chapter V is divided into two parts. The first part will provide a game-theoretical approach to study liquidity-based competition for order flow between a dealer market and a crossing network. It contains three games that differ with respect to the underlying payoff parameter which is the traders' value of immediate trade or disutility of nonexecuted orders, and with respect to the game's information structure. The first game will provide the framework of the analysis and shows the existence of multiple equilibria if the underlying payoff parameter is the same for all traders and common knowledge.

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