Abstract
Most discussions of security markets and asset pricing take trading system design as exogenous and as playing a relatively minor role in the overall pricing process. But more recently, interest in market microstructure has revealed the significant role that it can play in both market success and individual security pricing. Through its effects on market liquidity and the cost of trading in particular, microstructure can make a market more or less attractive, thereby encouraging market participation. For investors unaccustomed to dealing with international markets, the diversity in microstructure that exists, especially in the emerging markets, may come as a surprise. This paper highlights that diversity by examining the microstructure of seven securities markets in six countries. Each is different but many similarities also exist. Particularly noteworthy is the trend toward automation, a reflection of the interest in market innovation that characterizes these markets.