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Market fragmentation - Coggle Diagram

- - - - Investors need to search for the best price
        
        Costs arises: 1. Cost for time. 2. Cost for technology investments
        
        Agency problems: Brokers bear cost of search while client reap the reward. Which might then lead to lazy brokers, which decreases the incentive for liquidity providers to post attractive quotes
    - - Liquidity externalities arise when each market participant reduces trading fees or increase liquidity for other trades (Economies of scale effect)
    - - Interaction between investors at different venues are hindered
        
        Reducing the possibility of risk sharing
      - Local market power to liquidity providers (Pricing power
- - - - Technology allow liquidity to find its way to the right venue
    - - Securitiy trades are worse on one platform compared to others
        
        This problem can be alleviated if regulation bans violations of price priority between trading platforms
    - - Decreasing monopoly power
        
        Different needs are best served by different trading mechanisms (venues)