Why Discrete Price Fragments US Stock Exchanges and Disperses Their Fee Structures

• 成果类型: Article
• 署名作者: Chao, Yong; Yao, Chen; Ye, Mao
• 署名单位: University of Louisville; Chinese University of Hong Kong; University of Illinois System; University of Illinois Urbana-Champaign; National Bureau of Economic Research
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhy073
• 发表日期: 2019
• 页码: 1068
• 关键词: competition; MARKET; equilibrium; INNOVATION; tale

摘要

Stock exchange operators compete for order flow by setting make fees for limit orders and take fees for market orders. When traders can quote continuous prices, exchange operators compete on total fee, because traders can choose prices that perfectly neutralize any fee division. The 1-cent minimum tick size, however, prevents traders from neutralizing fee division. The nonneutrality of division between make and take fees (1) allows an exchange operator to establish exchanges that differ in fee structure to engage in second-degree price discrimination and (2) destroys the Bertrand equilibrium, leads to frequent fee changes, and encourages entries of new exchanges. Received May 29, 2016; editorial decision April 19, 2018 by Editor Robin Greenwood. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.