Does Stock Exchange Consolidation Improve Market Liquidity? A Study of Stock Exchange Acquisition in Russia
The last couple of decades have witnessed significant institutional and structural changes in financial sector within a worldwide trend toward consolidation. In the segment of organized trading stock exchanges merge and develop into large and diversified publicly traded companies. These processes are rather complicated in case of a transition economy like Russia. In December 2011 MICEX, the first largest and state-controlled stock exchange acquired RTS, the second largest and privately owned stock exchange primarily designed for foreign investors. We empirically investigate whether the acquisition resulted in improved liquidity of the Russian stock market which was one of the declared acquisition objectives. We use the Kolmogorov–Smirnov and the Wilcoxon tests to compare market-wide liquidity in several discrete periods pre and post acquisition. A deep and thorough insight into liquidity performance is ensured by assessing liquidity from limit order book data of tick frequency along three dimensions (tightness, immediacy, and elasticity).
The paper studies the patterns in the development of the Russian financial market after the crisis of 2008. It’s shown that along with positive phenomena, such as the creation of a modern financial market infrastructure and financial stabilization in 2015-2016, there are tendencies of deterioration of quantitative characteristics of the domestic stock market, it’s lagging behind external competitors, and a decline in the role of this market in the economy. As the key reasons restraining the growth of the financial market, the study addresses the problems of the scarcity of attractive instruments of domestic savings, excessive administrative burden on the business, restrictions on internal competition, the lack of a strategy for developing the financial market, linked to the priorities of economic policy.
The aim of this paper is to consider some problems with evaluation of the impact of high frequency trading on market liquidity. The first part is devoted to difficulties of disentangling the impact of high frequency on market liquidity from other relevant factors. The remainder of the paper is intended to discuss some issues affecting the evaluation of the influence of high frequency trading on particular aspects of market liquidity.
The problem of optimal portfolio liquidation under transaction costs has been widely researched recently, thus producing several approaches to problem formulation and solving. Obtained results can be used for decision making during portfolio selection or automatic trading at high-frequency electronic markets. This work gives a review of modern studies in this field, comparing models and tracking their evolution. The paper also presents results of applying the most recent findings in this field to real MICEX shares high-frequency data and gives an interpretation of the results.
The present article accentuates importance of requirement for providing and managing market liquidity and addresses the issue of institutional approach towards fulfilling this objective in the Russian system of organized trading in stocks. We conduct a comparative study of market microstructure components in the Equities Market of the Moscow Exchange which affect liquidity – the institution of market-makers – with corresponding market microstructure components of the New-York Stock Exchange and EURONEXT and reveal positive and negative effects of institutional adaptations from abroad. We describe existing and expected negative consequences of rendering market-making services in its present form in the Equities Market of the Moscow Exchange and conclude with offering recommendations on improving techniques in provision and management of market liquidity based on efficiency of institutional projects in practices abroad and existing need in adjustments in the Russian system of organized trading in stocks.
The paper examines the structure, governance, and balance sheets of state-controlled banks in Russia, which accounted for over 55 percent of the total assets in the country's banking system in early 2012. The author offers a credible estimate of the size of the country's state banking sector by including banks that are indirectly owned by public organizations. Contrary to some predictions based on the theoretical literature on economic transition, he explains the relatively high profitability and efficiency of Russian state-controlled banks by pointing to their competitive position in such functions as acquisition and disposal of assets on behalf of the government. Also suggested in the paper is a different way of looking at market concentration in Russia (by consolidating the market shares of core state-controlled banks), which produces a picture of a more concentrated market than officially reported. Lastly, one of the author's interesting conclusions is that China provides a better benchmark than the formerly centrally planned economies of Central and Eastern Europe by which to assess the viability of state ownership of banks in Russia and to evaluate the country's banking sector.
The paper examines the principles for the supervision of financial conglomerates proposed by BCBS in the consultative document published in December 2011. Moreover, the article proposes a number of suggestions worked out by the authors within the HSE research team.