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Market Fragmentation, Competition among platforms, Cons - Coggle Diagram
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Cons
Increased trading costs
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When informed traders uses multiple trading venues, its becomes more difficult for uninformed traders to infer information
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Prevents the positive effects of "liquidity externalities", as liquidity decreases and trading fees increase
Price dispersion
Creating dysfunctional markets with arbitrage opportunities, where the best ask price in one platform might be below that the best bid price in another platform
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Decrease liquidity
Decreases competition among liquidity providers, resulting in less incentives to offer good quotes
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