Trading activity surges associated with latency arbitrage are costly, as they lead to both lower liquidity and inefficient investments in order processing capacity that remains idle 90% of the time. A congestion message fee on liquidity-taking orders alleviates both concerns. The fee surges...

We develop a tractable model of a limit order market where informed and liquidity investors compete with a professional liquidity provider who has a monitoring advantage. We apply our model to study the impact of exogenous transaction costs and investor patience on trading activity and market...

We model a financial market where privately informed investors trade in a limit order book monitored by professional liquidity providers. Price competition between informed limit order submitters and professional market makers allows us to capture tradeoffs between informed limit and market...

Financial services are delivered almost exclusively online and cyber attackers have taken notice. We develop a principal-agent model with fee-paying clients who delegate security decisions to financial platforms that are subject to cyber attacks that steal data or assets. We derive testable...

Many equity exchanges charge the two parties of a trade different fees, often subsidizing liquidity providers. We examine this asymmetric, or maker-taker, pricing in a model where some investors pay fees directly to the exchange, while others pay them only on average, through flat commissions....

We build a model to show that decentralized exchanges (DEX) require less computing power on average than traditional exchanges to accommodate the demand for high-speed trading services. Centralized exchanges acquire excess processing capacity to accommodate activity surges: The idle capacity's...