A New Risk-Adjusted Performance Approach for Measuring the Value of Securities Exchanges

  • Maurizio Polato
  • Josanco Floreani
Part of the Palgrave Macmillan Studies in Banking and Financial Institutions book series (SBFI)


Valuing securities exchanges is far from constituting a well established stream of research. The traditional fields of investigation deal with governance issues, network effects (owing to the relevance of alliances among exchanges) and efficiency measures (focusing, in particular, on the implications of conglomerate exchanges with highly diversified business models). The body of literature dealing with network economics builds on the works of Economides (1993) and Economides and Flyer (1997). Another work modeling alliances between exchanges is that of Di Noia (1999). The application of network economics to stock exchanges constitutes the backbone of the research dealing with the economics of exchanges. In particular, alliances between stock exchanges permit the exploitation of economies of networking, both direct and indirect. This is a problem of both competition and coordination. Competition should be promoted, since customers should have the right to access all the services related to exchange trading, choosing for each of them the provider offering better conditions. Coordination is assured as long as exchanges adhere to common standards (compatibility) granting equal access to users (Economides and Flyer, 1997); it is, therefore, a precondition for proper competition in the market.


Stock Exchange Trading Volume Business Unit Cash Market Trading Service 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Andersén, A. (2005) ‘Pricing of stock exchange trading. The role of network externalities’, Helsinki School of Economics, Working Paper.Google Scholar
  2. Cantillon, E. and P.L. Yin (2011) ‘Competition between exchanges: a research agenda’, International Journal of Industrial Organization, 29(3), 329–36.CrossRefGoogle Scholar
  3. Di Noia, C. (1999) ‘Competition and integration among stock exchanges in Europe: network effects, implicit mergers and remote access’, Wharton, Working Paper, no. 3.Google Scholar
  4. Economides, N. (1993) ‘Network economics with application to finance’, Financial Markets, Institutions and Instruments, 2(5), 89–97.Google Scholar
  5. Economides, N. and Flyer F., 1997, Compatibility and market structure for network goods, Discussion Paper EC-98-02, Stern School of Business.Google Scholar
  6. James, C. (1996) ‘RAROC based capital budgeting and performance evaluation: A case study of bank capital allocation’, Wharton Financial Institutions Center, Working Paper, no. 40.Google Scholar
  7. Mendiola, A. and M. O’Hara (2004) ‘Taking stock in the stock markets: the changing governance of exchanges’, SSRN Working Paper.Google Scholar
  8. Otchere, I. (2006) ‘Stock exchange self-listing and value effects’, Journal of Corporate Finance, 12, 926–53.CrossRefGoogle Scholar
  9. Otchere, I. and E. Oldford (2011) ‘Can commercialization improve the performance of stock exchanges even without corporatization?’ The Financial Review, 46(1), 67–87.CrossRefGoogle Scholar
  10. Pagano, M., O. Randl, A. Röell and J. Zechner (2001) ‘What makes stock exchanges succeed? Evidence from cross-listing decisions’, European Economic Review, 45, 770–82.CrossRefGoogle Scholar
  11. Pownall, G., M. Vulcheva and X. Wang (2012) ‘Increasing liquidity on global stock exchanges: the structure of Euronext’, SSRN Working Paper.Google Scholar
  12. Rochet, J.C. and J. Tirole (2006) ‘Two-sided markets: a progress report’, Rand Journal of Economics, 37(3), 645–67.CrossRefGoogle Scholar
  13. Schmiedel, H. (2001) ‘Technological development and concentration of stock exchanges in Europe’, Bank of Finland, Working Paper no. 21.Google Scholar
  14. Schmiedel, H. and A. Schönenberger (2005) ‘Integration of securities market infrastructures in the euro area’, European Central Bank, Occasional Paper no. 33.Google Scholar
  15. Serifsoy, B. (2007) ‘Stock exchange business models and their operative performance’, Journal of Banking and Finance, 31(10), 2978–3012.CrossRefGoogle Scholar
  16. Shy, O. and J. Tarkka (2001) ‘Stock exchange alliances, access fees and competition’, Research Discussion Papers, Bank of Finland, no. 22.Google Scholar
  17. Song, L., H. Schmiedel and I. Hasan (2010) ‘Growth strategies and value creation. What works best for stock exchanges?’ European Central Bank, Working Papers, no. 1201.Google Scholar
  18. Zaik, E., J. Walter, G. Kelling and C. James (1996) ‘RAROC at Bank of America: from theory to practice’, Journal of Applied Corporate Finance, 9(2), 83–93.CrossRefGoogle Scholar

Copyright information

© Maurizio Polato and Josanco Floreani 2013

Authors and Affiliations

  • Maurizio Polato
    • 1
  • Josanco Floreani
    • 1
  1. 1.University of UdineItaly

Personalised recommendations