Towards integrated parallel markets - a solution approach to the order allocation problem [online]

Today’s financial electronic markets are a result of the
remarkable development in information technology during the
last years. With the growth of electronization in financial
markets and the establishment of new electronic trading
services the design of the market structure moved in the focus
of interest. Design decisions determine the market
microstructure, influencing trading patterns and investors
strategies and therefore market outcome. This paper motivates
the necessity of a new flexibility in market design to tackle
economic problems like the fragmentation of markets and the
resulting split up of liquidity. As a possible solution we
propose the concept of cascading Dynamic Market Models (cDMMs),
supporting multiple market models. To understand the
implications of cDMMs, we analyze the vices and virtues of
parallel market models.