Skip to main content
Disciplines
Automotive Business IT + Informatics Construction + Real Estate Electrical Engineering + Electronics Energy + Sustainability Insurance + Risk Finance + Banking Management + Leadership Marketing + Sales Mechanical Engineering + Materials
DE
EN
Books
Journals
Events
Topic Page
Marketing
Log in
Learn more about individual access
Request company access
Heavy-Duty Engines 2025 | 18 + 19 November 2025

Commercial Vehicles | Agricultural and Construction Machinery | Marine

Take part as a speaker in the 20th International MTZ Conference for the exchange of experience on industrial and commercial vehicle engines. Submit a subject proposal online!
EXTENDED SEARCH
Log in
Top
Review of Quantitative Finance and Accounting
Published in:

19-10-2023 | Original Research

Forced consolidation

Authors: Anna Pomeranets, Daniel G. Weaver

Published in: Review of Quantitative Finance and Accounting | Issue 2/2024

Log in

Activate our intelligent search to find suitable subject content or patents.

search-config
loading …

Abstract

The European Union is moving closer to consolidating their equity markets as the United States did in the 1970s. In February 2023 fourteen European exchanges collaborated on a proposal to create a consolidated tape. This paper provides an empirical examination of the impact of regulator-imposed consolidation on market quality. We find that creating a consolidated system in the EU will likely improve market quality, providing a monetary offset to the cost of creating the system.
previous article Identifying accounting conservatism in the presence of skewness
next article CEO confidence matters: the real effects of short sale constraints revisited

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 102.000 Bücher
  • über 537 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 340 Zeitschriften

aus folgenden Fachgebieten:

  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Versicherung + Risiko




Jetzt Wissensvorsprung sichern!

inform now
Appendix
Available only for authorised users
Footnotes
1
See Gordon 2023.
 
2
See Amihud et al. (2002), Bennett and Wei (2006), Cohen et al. (1985), Porter and Thatcher (1998), among others.
 
3
See Stoll (2001), Fong et al. (2001) and Neal (1987).
 
4
See Weaver (2008).
 
5
The SEC first proposed the CTS in 1972 and it was partially operating in 1974 (before the passage of the Act) and fully implemented in 1976.
 
6
A few months after the pilot system was established, the Pacific Stock Exchange joined and by November 1978 the network included the New York, American, Philadelphia, Boston, Midwest and Pacific Stock Exchanges. The Cincinnati Stock Exchange finally joined in 1981 and NASDAQ in 1982.
 
7
ITS allowed specialists on one exchange floor to send orders to specialists on another exchange floor and therefore sustain the dominance of exchange floors. This was the case until the rules passed in 2000s brought about the rise of automated trading systems.
 
8
It is important to note that this event coincides with another major event, the elimination of the 25% New York State securities transaction tax (STT) surcharge. The literature on STTs predicts that volatility will decrease following a reduction in the level of the tax.
 
9
Miller, Lowell. “Is the S.E.C. Selling Wall Street Short?” The New York Times 23 April 1978.
 
10
At the time, AMEX was not part of the system and AMEX stocks were not widely traded on regional exchanges.
 
11
There are a large number of papers that examine the SOES system including Christie and Schultz (1994), Christie et al. (1994) and Kandel and Marx (1999), among others.
 
12
For example, fragmentation can occur because traders have unequal access to information. Floor traders have direct access to floor information and are able to trade on information that is inaccessible to non-floor traders. Another example is trader preferences. Large traders prefer not to display their orders because they fear front-running. Alternatively, small traders prefer to display their orders. For more discussion see Harris (1993).
 
13
The BQR does not report data on the Cincinnati Stock Exchange.
 
14
See Holden (2009) and Goyenko, Holden and Trzcinka (2009).
 
15
See Bennett and Wei (2006) as well as O’Hara and Ye (2011)
 
16
See Chen et al. (2023), Lien et al. (2019), Lien et al. (2020), and Lien and Hung (2023).
 
Literature
Admati A, Pfleiderer P (1988) A theory of intraday patterns: volume and price variability. Rev Financ Stud 1(1):3–40CrossRef
Aitken M, Chen H, Foley S (2017) The impact of fragmentation, exchange fees, and liquidity provision on market quality. J Empir Financ 41:140–160CrossRef
Amihud Y (2002) Illiquidity and stock returns: cross section and time-series effects. J Financ Mark 5:31–56CrossRef
Amihud Y, Lauterbach B, Mendelson H (2003) The value of trading consolidation: evidence from the exercise of warrants. J Financ Quant Anal 38(4):829–846CrossRef
Alizadeh S, Brandt M, Diebold F (2002) Range-based estimation of stochastic volatility models. J Financ 57(3):1047–1091
Battalio RH (1997) Third market broker–dealers: cost competition or cream skimmers? J Finance 52(1):341–352
Bennett P, Wei L (2006) Market structure, fragmentation, and market quality. J Financ Mark 9:49–78CrossRef
Bessembinder H, Kaufman HM (1997) A cross-exchange comparison of execution costs and information flow for NYSE-listed stocks. J Financ Econ 46:293–319CrossRef
Biais B (1993) Price formation and equilibrium liquidity in fragmented and centralized market. J Finance 48(1)
Boneva L, Linton O, Vogt M (2016) The effect of fragmentation in trading on market quality in the UK equity market. J Appl Economet 31:192–213CrossRef
Branch B, Freed W (1977) Bid-asked spreads on the AMEX and the big board. J Financ 32(1):159–163
Chen Y, Lee C, Lin F (2023) The influences of information demand and supply on stock price synchronicity. Rev Quant Financ Acc 61:1151–1176CrossRef
Chlistalla M, Lutat M (2011) Competition in securities markets: the impact on liquidity. Fin Markets Portfolio Mgmt 25(2):149–172CrossRef
Chowdry B, Nanda V (1991) Multimarket trading and market liquidity. Rev Financ Stud 4(3):483–511CrossRef
Christie WG, Schultz PH (1994) Why do Nasdaq market makers avoid odd-eighth quotes? J Finance 49:1813–1840
Christie WWG, Harris J, Schultz P (1994) Why did Nasdaq market makers stop avoiding odd-eighth quotes? J Finance 49:1841–1860
Cohen KJ, Conroy RM, Maier SF (1985) Order flow and quality of the market. In: Amihud Y, Ho T, Schwartz R (eds) Market making and the changing structure of the securities industry. Lexington Books
Corwin SA, Schultz P (2012) A simple way to estimate bid-ask spreads from daily high and low prices. J Finance 67:719–759CrossRef
da Silva PP (2018) Fragmentation and market quality: the case of European markets. De Economist 166(2):179–206
Degryse H, De Jong F, Van Kervel V (2015) The impact of dark trading and visible fragmentation on market quality. Rev Finance 19(4):1587–1622CrossRef
Fong K, Madhavan A, Swan PL (2001) Why do markets fragment? A panel-data analysis of off-exchange trading. University of Sydney, Sydney, Australia, Unpublished Working Paper
Garbade KD, Silber WL (1979) Dominant and satellite markets: a study of dually traded securities. Rev Econ Stat 61:455–460CrossRef
Goyenko R, Holden CW, Trzcinka C (2009) Do liquidity measures measure liquidity? J Financ Econ 92(2):153–181CrossRef
Gresse C (2017) Effects of lit and dark market fragmentation on liquidity. J Financ Mark 35:1–20CrossRef
Hamilton JL (1979) Marketplace fragmentation, competition, and the efficiency of the stock exchange. J Finance 34(1):171–187CrossRef
Harris L (1993) Consolidation, fragmentation, segmentation, and regulation. Financ Mark Inst Instrum 2(5):1–28
Hautcoeur P, Rezaee A, Riva A (2018) Competition among securities markets. Working paper, Paris School of Economic Hendershott, T., and C. M. Jones, 2005, Island Goes Dark: Transparency, Fragmentation, and Regulation, Review of Financial Studies, 18(3):743–793
Hendershott T, Mendelson H (2002) Crossing networks and dealer markets: competition and performance. J Finance 55(5)
Hendershott T, Jones CM (2005) Island Goes Dark: transparency, fragmentation, and regulation. Rev Financ Stud 18(3), 743–793
Holden CW (2009) New low-frequency spread measures. J Financ Mark 12(4):778–813CrossRef
Kandel E, Marx LM (1999) Odd-eighth avoidance as a defense against SOES bandits. J Financ Econ 51:85–102CrossRef
Kyle A (1985) Continuous auctions and insider trading. Econometrica 53(6):1315–1335CrossRef
Lee C (1993) Market integration and price execution for NYSE-listed securities. J Finance 48(3)
Lien D, Hung P, Zhu J, Chen Y (2019) Price limit changes and market quality in the Taiwan Stock Exchange. Pac Basin Financ J 55(2019):239–258CrossRef
Lien D, Hung P, Pan C (2020) Price limit changes, order decisions, and stock price movements: an empirical analysis of the Taiwan Stock Exchange. Rev Quant Financ Acc 55:239–268CrossRef
Lien D, Hung P (2023) Whose trades contribute more to price discovery? Evidence from the Taiwan Stock Exchange. Rev Quant Finance Account 61:213–263CrossRef
Madhavan A (1995) Consolidation, fragmentation, and the disclosure of trading information. Rev Financ Stud 8(3):579–603CrossRef
Mendelson H (1987) Consolidation, fragmentation, and market performance. J Financ Quant Anal 22(2):189–208CrossRef
Neal L (1987) The integration and efficiency of the London and Amsterdam stock markets in the eighteenth century. J Econ Hist 47(1):97–115CrossRef
O’Hara M, Ye M (2011) Is market fragmentation harming market quality? J Financ Econ 100:459–474CrossRef
Pagano M (1989) Trading volume and asset liquidity. Quart J Econ 104(2):255–274CrossRef
Porter D, Thatcher J (1998) Fragmentation, competition, an limit orders: new evidence from interday spreads. Q Rev Econ Finance 38(1):111–128CrossRef
Weaver D (2008) “Networks, Nodes, and Priority Rules”. In: Cheng-few L, Lee AC (eds) The encyclopedia of finance. Springer Publishing
Metadata
Title
Forced consolidation
Authors
Anna Pomeranets
Daniel G. Weaver
Publication date
19-10-2023
Publisher
Springer US
Published in
Review of Quantitative Finance and Accounting / Issue 2/2024
Print ISSN: 0924-865X
Electronic ISSN: 1573-7179
DOI
https://doi.org/10.1007/s11156-023-01209-5

Other articles of this Issue 2/2024

What do dividend changes reveal? Theory and evidence from a unique environment

  • Open Access
  • Original Research

The risk of SIN or socially irresponsible stocks

How does credit market innovation affect the fiscal policy of state governments?

  • Original Research

CEO power, corporate risk management, and dividends: disentangling CEO managerial ability from entrenchment

  • Open Access
  • Original Research

Board diversity of industry expertise: impacts on strategic change and product markets

  • Original Research

Consistent valuation: extensions from bankruptcy costs and tax integration with time-varying debt

  • Original Research

Premium Partner

    Image Credits