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Securities Market Macrostructure: Property Rights and the Efficiency of Securities Trading

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  • Craig Pirrong

Abstract

This article derives securities market macrostructure from microstructural foundations under a variety of assumptions regarding property rights. Because liquidity effectively makes securities trading a network industry, intermediaries can exercise market power by restricting access to the trading mechanism. Fragmentation, cream skimming, and free riding reduce the inefficiency that results from this market power, but welfare would be improved further by requiring open access to all trading venues. Implementing open access in practice must confront a trade-off between reducing market power and potentially impairing the incentives of the operators of trading systems to reduce cost and improve quality. Other network industries, notably telecoms and electricity transmission, have faced similar dilemmas, and the path to the creation of a more efficient property rights structure in financial markets could benefit from the experiences of other network markets. Copyright 2002, Oxford University Press.

Suggested Citation

  • Craig Pirrong, 2002. "Securities Market Macrostructure: Property Rights and the Efficiency of Securities Trading," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 18(2), pages 385-410, October.
    • Handle: RePEc:oup:jleorg:v:18:y:2002:i:2:p:385-410
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    Cited by:

    1. Foucault, Thierry & Cespa, Giovanni, 2008. "Insiders-outsiders, transparency and the value of the ticker," HEC Research Papers Series 892, HEC Paris.
    2. Park, Jong-Ho & Binh, Ki Beom & Eom, Kyong Shik, 2016. "The effect of listing switches from a growth market to a main board: An alternative perspective," Emerging Markets Review, Elsevier, vol. 29(C), pages 246-273.
    3. Olfa Berrich & Halim Dabbou, 2023. "Tunisian corporate bond market liquidity: a qualitative approach," Qualitative Research in Financial Markets, Emerald Group Publishing Limited, vol. 15(5), pages 795-819, February.
    4. Panourgias, Nikiforos S., 2015. "Capital markets integration: A sociotechnical study of the development of a cross-border securities settlement system," Technological Forecasting and Social Change, Elsevier, vol. 99(C), pages 317-338.
    5. Mayorov, Sergey (Майоров, Сергей), 2019. "Market Microstructure Approach: A Review of Basic Concepts and Practices [Концепции И Практика Микроструктурного Подхода]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 2, pages 110-141, April.

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