Chapter

Revolution in the Exchange Industry: Battle for Liquidity and Financial Centres

Dariusz Wójcik

in The Global Stock Market

Published in print May 2011 | ISBN: 9780199592180
Published online September 2011 | e-ISBN: 9780191729089 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199592180.003.0007
Revolution in the Exchange Industry: Battle for Liquidity and Financial Centres

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Chapter 7 investigates competition in the stock exchange industry and its relationship with the development of financial centres. In 2000s regulation in the USA and Europe unleashed competition never before witnessed in the stock exchange industry. By 2010 new exchanges in the USA and Europe proved successful in the battle for liquidity. Essential to their success was the adoption of a simple and efficient business model of two-sided platforms, which contrasts with and threatens the model of diversification and vertical integration embraced by incumbent exchanges. The increased competition and network effects in the industry have been accompanied by its continued concentration in the New York City area in the USA, and emerging dominance of London in Europe. The chapter argues that while their iconic incumbent exchanges may suffer, revolution in the stock exchange industry benefits New York and London as financial centres.

Keywords: stock exchanges; competition; liquidity; financial centres; networks; Europe; London; regulation; technology; business model

Chapter.  11052 words.  Illustrated.

Subjects: Financial Institutions and Services

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