Do competition and incentives offered to designated market makers (DMMs) improve market liquidity? Using data from the … NYSE Euronext Paris, we show that an exogenous increase in competition among DMMs leads to a significant decrease in quoted … small changes in rebates and requirements for DMMs, do not have any tangible effect on market liquidity. Our analysis shows …

We study a continuous-time version of the intermediation model of Grossman and Miller (1988). To wit, we solve for the … competitive equilibrium prices at which liquidity takers' demands are absorbed by dealers with quadratic inventory costs, who can … impact. Smooth, diffusive, and discrete trades all incur finite but nontrivial liquidity costs, and can arise naturally from …

Do competition and incentives offered to designated market makers (DMMs) improve market liquidity? We employ data from … spreads. In particular, market liquidity increases the most for stocks with the largest increase in competition among DMMs …. Our analysis shows that competition among DMMs is an important aspect of contract design, along with elements such as …

replaced by agency intermediation. Our theory implies that improving market transparency can alleviate the pressure of …Investors can execute trades through either brokers that trade on their behalf (agency intermediation) or dealers that … trade with them (principal intermediation). We explain the heterogeneity in intermediation via the trade-off between …