Regulation and security design in concentrated markets

• 成果类型: Article
• 署名作者: Babus, Ana; Hachem, Kinda
• 署名单位: Washington University (WUSTL); Center for Economic & Policy Research (CEPR); National Bureau of Economic Research
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2021.05.003
• 发表日期: 2021
• 页码: 139-151
• 关键词: Security design; market structure; market power

摘要

Regulatory debates about centralized trading assume security design is immune to market structure. We consider a regulator who introduces an exchange to increase liquidity, understanding that security design is endogenous. For a given security, investors would like to trade in a larger market and, for a given market structure, they would like to trade a safer security. We show that financial intermediaries design riskier securities after the exchange is introduced, even when the exchange leads to the origination of safer underlying assets. The results reflect a relative dilution of investor market power and motivate coordinated policies to improve investor welfare. (c) 2021 Elsevier B.V. All rights reserved.