A Theory of Stock Exchange Competition and Innovation: Will the Market Fix the Market?

• 成果类型: Article
• 署名作者: Budish, Eric; Lee, Robin S.; Shim, John J.
• 署名单位: University of Chicago; National Bureau of Economic Research; Harvard University; University of Notre Dame
• 刊物名称: JOURNAL OF POLITICAL ECONOMY
• ISSN/ISSBN: 0022-3808
• DOI: 10.1086/727284
• 发表日期: 2024
• 页码: 1209-1246
• 关键词: information; ECONOMICS; auctions; MODEL; ask

摘要

Will stock exchanges innovate to address latency arbitrage and the arms race for speed? This paper models how exchanges compete in the modern electronic era and how this shapes incentives for market-design innovation. In the status quo, exchange trading fees are competitive, but exchanges earn economic rents from selling speed. These rents create a wedge between private and social incentives to innovate and support the persistence of an inefficient market design in equilibrium of a market-design adoption game. We discuss implications for policy and insights for the literatures on market design, innovation, and platforms.