Czech experience with market maker trading system

We study the evolution of trading in a market maker trading system (SPAD) introduced to the Prague Stock Exchange in 1998. We find that the new system succeeded in increasing the transparency of the market, improved the price discovery function of the exchange, and that investors have benefited from...

Full description

Saved in:
Bibliographic Details
Published in:Economic systems 2004-06, Vol.28 (2), p.177-191
Main Authors: Hanousek, Jan, Podpiera, Richard
Format: Article
Language:English
Subjects:
Emerging markets
Informed trading
Trading systems
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:We study the evolution of trading in a market maker trading system (SPAD) introduced to the Prague Stock Exchange in 1998. We find that the new system succeeded in increasing the transparency of the market, improved the price discovery function of the exchange, and that investors have benefited from lowered spreads. From this viewpoint, it may be an example for other markets where lack of transparency negatively affects the price discovery function and trading costs. However, we find no evidence that the extent of informed trading decreased over time.
ISSN:0939-3625
1878-5433
DOI:10.1016/j.ecosys.2004.06.001