Abstract
We examine whether euro conversion affected competition among European exchanges with respect to equity trading costs and volume. Results show that average trading costs decreased by almost 20% in Europe, and turnover increased 10%. Trading costs decreased or remained unchanged on all exchanges, but volume deteriorated in some markets and improved in others. These effects occurred on both euro and non-euro European exchanges. Our results suggest that euro conversion boosted competition for order flow among the exchanges. Paris, London and Milan were among the winners, while Madrid and Brussels lost volume. Both firm-specific and country-level factors contribute to these outcomes.
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