scholarly journals Market Microstructure Approach: A Review of Basic Concepts and Practices (Ending)

2019 ◽  
pp. 96-109
Keyword(s):  
Market Structure ◽  
Market Efficiency ◽  
Adverse Selection ◽  
Market Microstructure ◽  
Market Liquidity ◽  
Market Frictions ◽  
Market Quality ◽  
Financial Infrastructure ◽  
Clearing And Settlement ◽  
The Impact

The article gives an overview of the market microstructure approach, where modern financial infrastructure (trading, clearing and settlement) has for the first time become an object of dedicated research, contrary to traditional microeconomic models dealing with abstract demand, supply etc. apart from market realities. The market microstructure approach focuses on analysis of market frictions impacting on how new equilibriums are being come upon. Market frictions exist due to fragmented market structure and information asymmetries. Respectively, the article (Part 1) compares “market microstructure” and “market structure”; reveals drivers of spatial and temporal fragmentation (including breakdown of modern trading protocols and participation models); analyzes information (self-)learning of market and adverse selection; makes distinctions between “market quality”, “market efficiency” and “market liquidity”; and traces how the market efficiency and equilibrium concepts were evolving when market frictions drew attention. How the market microstructure approach may work is demonstrated in the course of a high-frequency trading (HFT) case study in Part 2 of the article. HFT has brought new evidence that market structure matters—both as an environment where tech innovations are only possible and as mechanisms to be adjusted to new challenges—and has outlined directions for further elaborations on basic microstructural concepts. The article associates HFT with market fragmentation, describes the impact of HFT on participation structure and market quality, summarizes predatory and similar practices of HFT and instruments to mitigate them, and clarifies the specifics of information asymmetry and adverse selection within the HFT framework.

scholarly journals Market Microstructure Approach: A Review of Basic Concepts and Practices

2019 ◽  
Vol 14 (2) ◽  
pp. 110-141
Keyword(s):  
Market Structure ◽  
Market Efficiency ◽  
Adverse Selection ◽  
Market Microstructure ◽  
Market Liquidity ◽  
Market Frictions ◽  
Market Quality ◽  
Financial Infrastructure ◽  
Clearing And Settlement ◽  
The Impact

The article gives an overview of the market microstructure approach, where modern financial infrastructure (trading, clearing and settlement) has for the first time become an object of dedicated research, contrary to traditional microeconomic models dealing with abstract demand, supply etc. apart from market realities. The market microstructure approach focuses on analysis of market frictions impacting on how new equilibriums are being come upon. Market frictions exist due to fragmented market structure and information asymmetries. Respectively, the article (Part 1) compares “market microstructure” and “market structure”; reveals drivers of spatial and temporal fragmentation (including breakdown of modern trading protocols and participation models); analyzes information (self-)learning of market and adverse selection; makes distinctions between “market quality”, “market efficiency” and “market liquidity”; and traces how the market efficiency and equilibrium concepts were evolving when market frictions drew attention. How the market microstructure approach may work is demonstrated in the course of a high-frequency trading (HFT) case study in Part 2 of the article. HFT has brought new evidence that market structure matters—both as an environment where tech innovations are only possible and as mechanisms to be adjusted to new challenges—and has outlined directions for further elaborations on basic microstructural concepts. The article associates HFT with market fragmentation, describes the impact of HFT on participation structure and market quality, summarizes predatory and similar practices of HFT and instruments to mitigate them, and clarifies the specifics of information asymmetry and adverse selection within the HFT framework.

scholarly journals Visible and Invisible Forces. What Drives the Intensity of Trading in the European Carbon Market?

2019 ◽  
Vol 11 (1) ◽  
pp. 117-144
Author(s):  
Iordanis Kalaitzoglou
Keyword(s):  
Market Structure ◽  
Market Efficiency ◽  
Carbon Market ◽  
Futures Contracts ◽  
Market Participants ◽  
Regulatory Changes ◽  
European Climate ◽  
Set Up ◽  
The Impact ◽  
Unobservable Factors

This study models the trading intensity in European Allowances (EUA) futures contracts, in the European Climate Exchange (ECX) using various specifications and investigates the forecasting ability of observable versus unobservable factors. This set up tests empirically the impact of the evolving market structure through regulatory updates and the contribution of the different market participants to the intensity of trading in the European Carbon market. The findings suggest that observable market characteristics capture better the dynamics of trading intensity than their latent counterparts, which implies that regulatory changes that enhance transparency would also improve market efficiency.

REITs and Market Microstructure: A Comprehensive Analysis of Market Quality

2017 ◽  
Vol 39 (1) ◽  
pp. 65-98
Author(s):  
Pawan Jain ◽  
Mark Sunderman ◽  
K. Janean Westby-Gibson
Keyword(s):  
Market Microstructure ◽  
Comprehensive Analysis ◽  
Market Quality

The Impact of Structural Reforms and Regulations on the Demand Side in the Railway Industry

2019 ◽  
Vol 18 (1) ◽  
pp. 1-33
Author(s):  
Fumitoshi Mizutani
Keyword(s):  
Market Structure ◽  
Vertical Integration ◽  
High Speed ◽  
Fixed Effect Model ◽  
Structural Reform ◽  
Estimation Methods ◽  
Public Ownership ◽  
Estimation Model ◽  
Passenger Demand ◽  
The Impact

Abstract The main purpose of this study is to evaluate factors affecting passenger rail demand, with special attention to the effects of structural reform/regulation and competition. In order to do this, we use data obtained from 30 OECD countries for the 24 years from 1990 to 2013. As structural reform/regulation and competition variables, we take the OECD’s five kinds of regulatory indices: (i) overall, (ii) entry, (iii) public ownership, (iv) vertical integration, and (v) market structure; and for competition variables, we take (vi) rail passenger-freight ratio, (vii) rail share, and (viii) high-speed train ratio. As estimation methods, both the fixed effect model and the Hausman-Taylor estimation model are used. The major findings are as follows. First, competition as competitiveness (i.e. the share of rail, passenger over freight ratio) increases passenger demand. And the existence of high-speed trains increases passenger demand. Second, overall, entry regulation, and market structure have no significant effect on demand. Third, public ownership affects passenger demand positively. Last, vertical integration reduces passenger demand.

Banking market structure and efficiency: an assessment of the USA and Canada

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Salah U-Din ◽  
David Tripe
Keyword(s):  
Market Structure ◽  
Market Power ◽  
Negative Impact ◽  
Positive Impact ◽  
Bank Efficiency ◽  
Content Type ◽  
Frontier Analysis ◽  
Banking Market ◽  
Cost Efficient ◽  
The Impact

PurposeThe study aims to analyze the changes in banking market structure and their impact on the bank efficiency.Design/methodology/approachThis study uses a one-stage stochastic frontier analysis (SFA) to compare the impact of the market structure and the GFC on the economic efficiency of the major banks in both countries.FindingsA significant negative impact of the GFC is observed on bank efficiency. Overall, Canadian banks posted better efficiency scores than their American counterparts. Additionally, cost-efficient banks are found to be more resilient to crises and more profit-efficient in the post-GFC period. The authors found that market power had a positive impact on the cost and profit efficiency of banks. Higher levels of equity, market power and concentration helped banks be more cost-efficient.Research limitations/implicationsOnly large banks are selected for study although it represents the majority stake of both banking sectors.Practical implicationsBanking regulators should include more measures to assess the banking market structure and performance.Originality/valueAs per the best knowledge of the authors, it is the first study to assess the change in banking market structure and efficiency of the US and Canadian banking sectors in the post-GFC period.

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