FESE De la Vega Prize 2024

FESE is proud to announce the “De la Vega Prize 2024” winners, Vincent van Kervel and Bart Zhou Yueshen, for their relevant paper, “Anticompetitive Price Referencing”.

Van Kervel and Zhou Yueshen’s research explores how price referencing can unintentionally promote anticompetitive behaviour in financial markets, shedding light on an area of critical importance for market participants and regulators.

The paper explores how off-exchange trades executed by referencing on-exchange prices can soften competition among market makers on exchanges and make liquidity more expensive for investors. Price referencing equalises on- and off-exchange prices, ensuring best execution but making investors indifferent to the trading venue. Consequently, market makers obtain a license to fragment orders off exchange, raising their profits while exacerbating market-wide illiquidity.

Their findings on the negative consequences of price referencing apply to various forms of off-exchange trading: wholesalers’ in-house execution of retail orders (from payment for order flow arrangements), broker-dealer internalisation, single-dealer platforms, etc. The policy analysis suggests that competition in off-exchange liquidity supply possibly alleviates such negative consequences.

FESE Press Release

▶ About Josseph De la Vega

Josseph De la Vega was born around 1650 into a family of Sephardi Jews. After several dramatic works and novels, in 1688 De la Vega published Confusión de Confusiones, a book of dialogues concerned with the operations of the Amsterdam Stock Exchange. De la Vega gives three motives for writing the dialogues: simple pleasure; to increase understanding among those who were not in the financial business of what he regarded as “the most honest and most useful [business] of all that existed at the time”; and, on the other hand, to caution about the “tricks” engaged in by contemporary financial businesspeople.

FESE believes there still to be much value and relevance today in many of De la Vega's observations about the behaviour of investors in markets. This is why since 2000, FESE has chosen to award an eponymous Prize to young scholars delivering outstanding research in the same field. The winners from previous editions can be found here.