RSM research on stock exchange competition wins paper award

Dr Sarah Draus from Rotterdam School of Management, Erasmus University (RSM) won this year’s FESE De la Vega Prize for her paper on the effects of multi-market trading on stock exchange fees. The assistant professor of finance received the award in Vienna in June 2018, at the annual convention of the Federation of European Securities Exchanges (FESE).

In her paper Market power on exchanges: linking price impact to trading fees, Dr Sarah Draus describes how recent regulations such as the European Directive MiFID, aimed at making trading and exchange services more competitive, triggered the proliferation of competing trading venues and resulted in high order flow fragmentation. Her theoretical paper demonstrates that fragmentation allows liquidity providers and exchanges to retain market power. The results are derived in the framework of a duopoly competition model, in which a rational trader fragments his order to reduce price impact whenever exchanges are not completely liquid. This behaviour induces mark-ups on both transaction prices and exchange trading fees.

Practical implications

Dr Draus’ study suggests that regulation that leads to new entrants in a monopolistic exchange industry, such as the European Directive MiFID, influences trading fees through two channels: first through the direct competition effect since trading volume can be split, and second through its effect on market liquidity, which also determines trading fees. Estimating empirically the importance of each channel is highly relevant for financial regulators and other policy makers.

Outstanding research

FESE awards its FESE De la Vega Prize annually for an outstanding research paper by academics or practitioners. The papers must be about current developments in European securities markets which promote public markets.

The jury consisted of academics and leaders from top business schools and financial institutions, including Warwick Business School, Goldman Sachs, the Eurasian Economic Commission, and Copenhagen Business School.

The 2018 prize was awarded by FESE President Deirdre Somers, CEO of Euronext Dublin, and Rainer Riess, FESE’s Director General, at the Gala Dinner of the FESE Convention in Vienna on 20 June 2018.

Dr Sarah Draus

Sarah Draus is an assistant professor in the Department of Finance at Rotterdam School of Management, Erasmus University (RSM). Her research interests lie in the area of theoretical market microstructure of financial markets, industrial organisation of securities markets, as well as some aspects of financial regulation. She is currently working on exchange competition, the role and the design of circuit breakers, and high frequency trading.

Dr Draus’ work has been presented in major international conferences, including the Western Finance Association Annual Meeting and the Annual Central Bank Workshop on the Microstructure of Financial Markets. She holds a PhD in finance from the University Paris-Dauphine. She held a position at the Center for Studies in Economics and Finance of the University of Naples Federico II before joining RSM.

More information

Federation of European Securities Exchanges (FESE) represents 36 exchanges in equities, bonds, derivatives and commodities through 19 full members from 30 countries, as well as one affiliate member and one observer member. FESE members have around 8,500 companies listed on their markets, of which 15 per cent are foreign companies contributing towards the European integration and providing broad and liquid access to Europe’s capital markets.

Rotterdam School of Management, Erasmus University (RSM) is one of Europe’s top 10 business schools. RSM provides ground-breaking research and education furthering excellence in all aspects of management and is based in the international port city of Rotterdam – a vital nexus of business, logistics and trade. RSM’s primary focus is on developing business leaders with international careers who can become a force for positive change by carrying their innovative mindset into a sustainable future. Our first-class range of bachelor, master, MBA, PhD and executive programmes encourage them to become critical, creative, caring and collaborative thinkers and doers. Study information and activities for future students, executives and alumni are also organised from the RSM office in Chengdu, China.

For more information about RSM or this release, please contact Marianne Schouten, communications manager for RSM, on +31 10 408 2877 or by email at

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