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Market Fragmentation : - Coggle Diagram
Market Fragmentation :
CONS
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Outright arbitrage opportunities - the best offer price in one platform may be below the best bid price in another market
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Cost of fragmentation
Asymmetric information
Finding the best trade is more costly and time consuming,
Risk bearing capacity
Not only impairs liquidity but also diminishes the opportunities for risk sharing among market participants (
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PROS
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Give local market power to liquidity suppliers since there is no competition with counterparts in another platforms
Creates competition among platforms which tends to reduce fees and foster innovation in trading technology
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Increase liquidity
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Dark trading - "Finally, I find that dark fragmentation positively impacts liquidity, or at worst does not affect it." (Gresse, 2017)
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