Endogenous formation of security exchanges

Marta Faias, Jaime Luque

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)


We use club theory for the first time to provide a model of securities exchange (SX) formation. We think of a SX as a local public good that allows its traders to diversify risk by trading their securities with other SX members. In our two-stage equilibrium setting, traders evaluate SXs depending on their risk-sharing possibilities and, given these evaluations, choose the SX they want to join. Security prices can differ among SXs and traders may value SX memberships differently. We establish continuity properties in both stages and show that equilibrium exists for a generic set of economies. © 2016 Springer-Verlag Berlin Heidelberg
Original languageEnglish
Pages (from-to)331-355
JournalEconomic Theory
Issue number2
Publication statusPublished - 1 Aug 2017


  • Endogenous securities exchange structure
  • Security prices
  • Risk sharing
  • Membership prices
  • Equilibrium
  • Club theory


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