Micex vs rts battle of exchanges who wins the order flow supremacy
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MICEX vs RTS: Battle of Exchanges Who wins the order flow supremacy?. Discussion by Piotr Korczak, University of Bristol. 3rd EMG Workshop on Microstructure of Financial Markets Cass Business School, London, 1 May 2009. What do the authors do?.

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MICEX vs RTS: Battle of Exchanges Who wins the order flow supremacy?

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MICEX vs RTS: Battle of ExchangesWho wins the order flow supremacy?

Discussion by Piotr Korczak, University of Bristol

3rd EMG Workshop on Microstructure of Financial Markets

Cass Business School, London, 1 May 2009


What do the authors do?

  • The analysis of price discovery of 7 Russian stocks listed both on MICEX and RTS

  • Reconstruction of the limit order book, application of standard measures of price discovery across markets (Hasbrouck, Gonzalo/Granger)

  • Main finding

    • Majority of price discovery (65-90%) on MICEX which has 80% of the combined MICEX/RTS trading volume


General comments

  • Important and up-to-date issue of competition between trading venues (exchanges, trading platforms)

  • Thorough analysis

  • … BUT missing blocks

    • Other trading venues for the sample stocks

    • The effect of the exchange rate


Price discovery and liquidity

  • Shares in trading volumes

Source: http://www.nes.ru/~agoriaev/FMI4%20primary%20and%20secondary%20markets.pdf


Price discovery and exchange rate

  • MICEX: prices in Roubles

  • RTS: prices in US Dollars

  • The fixed exchange rate during the day can distort the picture

  • See also, Grammig, Melvin and Schlag (JEF, 2005) on how volatility of the exchange rate influences the results from the bivariate vs trivariate price discovery models


Other comments – Primer on MICEX and RTS

  • Do we know who trades there?

    • Retail investors vs. institutions?

    • Foreign vs. domestic investors?

  • Does trading in USD and minimum trading lot on RTS have an impact on who trades there?

  • Do we expect investors to operate across the markets?

    • Arbitrage, order splitting?


Other comments - Positioning of the paper

  • Strengthen the link with the literature on alternative domestic trading venues

  • Play down the link with the literature on international cross-listing

    • Trading in domestic vs. foreign venues influenced by information frictions, differences in monitoring, corporate governance standards, time zone…


Possible extensions

  • How microstructure of the domestic market changes when the foreign market is open

    • See, Moulton and Wei (JFM, forthcoming)


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