IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v71y2025i1p184-201.html
   My bibliography  Save this article

Market Liquidity and Competition Among Designated Market Makers

Author

Listed:
  • Mario Bellia

    (European Commission, Joint Research Centre (JRC), 21020 Ispra, Italy)

  • Loriana Pelizzon

    (SAFE, Goethe University Frankfurt, 60323 Frankfurt am Main, Germany; Ca’ Foscari University of Venice, 30123 Venice, Italy; CEPR, London EC1V 0DX, United Kingdom)

  • Marti G. Subrahmanyam

    (Leonard N. Stern School of Business, New York University, New York, New York 10012; NYU Shanghai, Shanghai 200122, China)

  • Darya Yuferova

    (Norwegian School of Economics (NHH), 5045 Bergen, Norway)

Abstract

Do competition and incentives offered to designated market makers (DMMs) improve market liquidity? We employ data from NYSE Euronext Paris to show that exogenous changes in contract design lead to significant decreases in quoted and effective spreads. In particular, market liquidity increases the most for stocks with the largest increase in competition among DMMs. Our analysis shows that competition among DMMs is an important aspect of contract design, along with elements such as rebates and requirements.

Suggested Citation

  • Mario Bellia & Loriana Pelizzon & Marti G. Subrahmanyam & Darya Yuferova, 2025. "Market Liquidity and Competition Among Designated Market Makers," Management Science, INFORMS, vol. 71(1), pages 184-201, January.
    • Handle: RePEc:inm:ormnsc:v:71:y:2025:i:1:p:184-201
    DOI: 10.1287/mnsc.2022.01801
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.2022.01801
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.2022.01801?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:71:y:2025:i:1:p:184-201. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.