Skip to main content
Endogenous Formation of Security Exchanges
Economic Theory (forthcoming) (2016)
  • Marta Faias, Universidade Nova de Lisboa
  • Jaime Luque
We use club theory for the …rst 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 di¤er among SXs and traders may value SX memberships di¤erently. We establish continuity properties in both stages and show that equilibrium exists for a generic set of economies.
  • endogenous securities exchange structure,
  • security prices,
  • risk sharing,
  • membership prices,
  • equilibrium,
  • club theory
Publication Date
Publisher Statement
Citation Information
Marta Faias and Jaime Luque. "Endogenous Formation of Security Exchanges" Economic Theory (forthcoming) (2016)
Available at: