Call Market Trading: History, Economics, and Regulation
Coming on the back of well over a century’s worth of development in continuous trading of securities, the relatively recent arrival of electronic call market trading is a shock to the system. Traders appear reluctant to abandon the drive for the ever more “immediate” trade, even when it is clear that immediacy is costly and often unnecessary.1 Regulators are hard-pressed to adapt long-established market structure rules to systems that generate trades in unfamiliar ways. Similar functioning systems are subject to very dissimilar regulation: some are regulated as “exchanges” (AZX),2 some as “facilities” of an exchange (Bond Connect, and the defunct Optimark and Chicago Match), and some as “brokers” (Instinet and Posit crosses). Finally, call markets pose new and complex challenges for researchers. The interaction of continuous time and discrete trading environments is difficult to analyze, particularly when critical concepts such as “liquidity” and “immediacy” remain murky in economic theory.
KeywordsTrading Cost Dealer Market Order Flow Auction Market Trading Mechanism
Unable to display preview. Download preview PDF.
- Domowitz, Ian, and Benn Steil. “Automation, Trading Costs, and the Structure of the Securities Trading Industry”, Brookings-Wharton Papers on Financial Services, 1999, Washington, DC: The Brookings Institution, 1999.Google Scholar
- Economides, Nicholas, and Robert A. Schwartz. “Equity Trading Practice and Market Structure: Assessing Asset Managers’ Demand for Immediacy”, Financial Markets, Institutions, and Instruments, 4 (4), 1995.Google Scholar
- Handa, Puneet, and Robert A. Schwartz. “Dynamic Price Discovery”, working paper, New York University, 1994.Google Scholar
- Kregel, Jan. “Financial Innovation and the Organisation of Stock Market Trading”, Banca Nazionale del Lavoro Quarterly Review (167), December 1988.Google Scholar
- Kregel, Jan. “Some Considerations on the Causes of Structural Change in Financial Markets”, Journal of Economic Issues (XXVI:3), September 1992a.Google Scholar
- Kregel, Jan. “Walras’ Auctioneer and Marshall’s Well-Informed Dealers: Time, Market Prices and Normal Supply Prices”, Quaderni di Storia dell’Economia Politica, 1992b.Google Scholar
- Milgrom, Paul, and Nancy Stokey. “Information, Trade and Common Knowledge”, Journal of Economic Theory (26), 1982.Google Scholar
- Miller, Merton. Financial Innovations and Market Volatility. Cambridge: Blackwell, 1991.Google Scholar
- Schwartz, Robert A., and Benn Steil. “Equity Trading III: Institutional Investor Trading Practices and Preferences”, in Benn Steil et al, The European Equity markets: The State of the Union and an Agenda for the Millennium, London: European Capital Markets Institute and the Royal Institute of International Affairs, 1996.Google Scholar
- Walras, Léon. Eléments d’Economie Pure. Lausanne: 1st ed. (in 2 instalments), 1874–1877; 2nd ed., 1889; 3d ed., 1896; 4th ed., 1900; definitive ed. (published posthumously), 1926. Reprinted; Paris, 1952.Google Scholar