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Inter-market competition for exchange traded funds

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Abstract

We examine how the different mix of informed and liquidity trading in the market for ETFs affects the nature of inter-market competition. We find that both the characteristics of the securities and the structures of the competing markets jointly determine the nature of inter-market competition. Given the superior execution quality on the ECNs and the low adverse selection costs in the ETF market, anonymous market such as the ECNs, attract both liquidity and informed traders. We also find that markets compete in a subset of ETFs. In addition, we find that quotebased competition is prevalent in the market for ETFs.

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Authors and Affiliations

  1. Department of Accounting and Finance, Graves School of Business and Management, Morgan State University, 21252, Baltimore, MD

    Vanthuan Nguyen

  2. Department of Finance, School of Business, 38677, University, MS

    Bonnie F. Van Ness & Robert R. Van Ness

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  1. Vanthuan Nguyen
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  2. Bonnie F. Van Ness
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  3. Robert R. Van Ness
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Nguyen, V., Van Ness, B.F. & Van Ness, R.R. Inter-market competition for exchange traded funds. J Econ Finan 31, 251–267 (2007). https://doi.org/10.1007/BF02751646

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