tailieunhanh - Research " COMPETITION AMONG EXCHANCES DOES MULTIPLE LISTING AFECT TRADING COSTS ON OPTIONS MARKETS "

COMPETITION AMONG EXCHANCES DOES MULTIPLE LISTING AFECT TRADING COSTS ON OPTIONS MARKETS Third, parents concern for the peer group may be so large that it dominates effectiveness in their choices, so that again there is no effect of choice on effectiveness sorting. | THE UNIVERSITY OF CHICAGO COMPETITION AMONG EXCHANGES DOES MULTIPLE LISTING AFFECT TRADING COS TS ON OP TIONS MARKE TS. A DISSERTATION SUBMITTED To HIE FACULTY OF THE DIVISION OF THE SOCIAL SCIENCES IN CANDIDACY FOR THE DEGREE OF DOCTOR - OF PHILOSOPHY DEPAR TMENT OF ECONOMICS BY ELIZABETH XIAO-RU WANG CHICAGO ILLINOIS AUGUST 2000 UMI Number 9978085 _ __ ƯMI UMI Microform9978085 Copyright 2000 by Bell Howell Information and Learning Company. All rights reserved. This microform edition is protected against unauthorized copying under Title 17 United States Code. Bell Howell Information and Learning Company 300 North Zeeb Road . Box 1346 Ann Arbor Ml 48106-1346 ABSTRACT Tins paper studies the effe ts f cottipet among options eychanges Illi trading costs. Prior til 1990. exchanges were granted niotiopolv power over the options dll-tracts they marketed. After 1990. exchanges were allowed to compete over the whole universe of option contracts both those alreadv created and those yet Io be introduced. We use this unique experiment to examine the impact of competition on trading costs. We hnd I hat options that are traded on several exchanges have spreads that are on average 1 ri lower than those of single listed options This finding survives attempts to control for differences in the characteristics of single listed and multiple listed options the simultaneity of spreads and volume and the endogeneity of the multiple listing decision. However till li tii lity externality creates market power for the dominant exchange listing a particular option. We find that the spreads on a newly listed option widen over time increasing as most of the trading volume of a particular contract becomes concentrated on a single exchange. Nonetheless. we find that market power is disciplined by competition from the exchange s where the remaining volume is traded spreads on multiple listed options trading primarily on a dominant exchange are not as wide as spreads for single listed options.