Trading Fees and Efficiency in Limit Order Markets

@inproceedings{Colliard2011TradingFA,
  title={Trading Fees and Efficiency in Limit Order Markets},
  author={Jean-Edouard Colliard and Hans Degryse and Thomas P. Gehrig and Stefano Lovo and Katya Malinova and Albert J. Menkveld and Sophie Moinas and Mark Van Achter},
  year={2011}
}
Common wisdom has it that competition between trading platforms in securities markets benefits investors because it forces platforms to charge smaller fees. We challenge this view by showing that a decrease in trading fees can impair investors’ expected welfare in limit order markets. Indeed, a decrease in trading fees can induce investors to strategically post limit orders with a smaller execution probability, in order to earn a greater surplus in case of execution. Hence, a decrease in… CONTINUE READING
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