Overview and details of the sessions of this conference. Please select a date or location to show only sessions at that day or location. Please select a single session for detailed view (with abstracts and downloads if available).
Please note that all times are shown in the time zone of the conference. The current conference time is: 19th May 2024, 02:55:01am CEST
Does Market Efficiency Impact Capital Allocation Efficiency? The Case of Decentralized Exchanges
Evgeny Lyandres1, Alexander Zaidelson2
1Tel Aviv University, Israel; 2SCRT Labs
Discussant: Laurence Daures (ESSEC Business School)
We examine the effect of market efficiency on the efficiency of capital allocation in the setting of decentralized exchanges of crypto assets. Utilizing data on nearly 100 million trades in concentrated liquidity pools on two leading blockchains, we construct a highly granular, capital-market-based measure of capital allocation efficiency. We also design and implement a method of identifying market-efficiency-restoring arbitrage transactions among all blockchain transactions and construct arbitrage-based granular measures of market efficiency. We find that market efficiency has positive, economically and statistically significant, and causal impact on capital allocation efficiency.
Anticompetitive Price Referencing
Vincent van Kervel1, Bart Zhou Yueshen2
1Pontificia universidad católica de Chile, Chile; 2Singapore Management University
Discussant: Albert S. Kyle (University of Maryland)
Off-exchange trades are often executed by referencing on-exchange prices. In equilibrium, such price referencing softens market makers' on-exchange competition and makes liquidity expensive for investors. Additionally, by equalizing on- and off-exchange prices, price referencing guarantees “best-execution” and makes investors indifferent where to trade. Market makers effectively obtain a license to fragment orders off exchange, raising their profits but reinforcing market-wide illiquidity. This inefficiency remains tenacious even if more market makers enter and if they are forced to compete off exchange, as in the SEC's proposed order-by-order auction. The model yields important implications for regulating various forms of off-exchange trading.
