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Trading mechanisms and market quality: Limit-order books versus dealership markets

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  • Xing, Xiaochuan
  • Xue, Yi

Abstract

We compare the market quality of the dealer market and limit order book (LOB) market in a unified framework. We find that, in terms of liquidity and gains from trade, dealer market performs better when the order size is small, while LOB market performs better when the order size is large. A competitive hybrid market where the dealer marker and the LOB market compete with each other dominates the two pure markets.

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  • Xing, Xiaochuan & Xue, Yi, 2017. "Trading mechanisms and market quality: Limit-order books versus dealership markets," Economics Letters, Elsevier, vol. 154(C), pages 35-44.
    • Handle: RePEc:eee:ecolet:v:154:y:2017:i:c:p:35-44
    DOI: 10.1016/j.econlet.2017.02.022
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    2. Iwatsubo, Kentaro & Rhee, S. Ghon & Zhang, Ye Zhou, 2023. "Dealership versus continuous auction: Evidence from the JASDAQ market," Pacific-Basin Finance Journal, Elsevier, vol. 77(C).

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