2nd CEPR-Imperial-Plato Market Innovator (MI3) Conference 2018 – The influence of cross-border cooperation on equity market liquidity



2nd CEPR-Imperial-Plato Market Innovator (MI3) Conference 2018

The influence of cross-border cooperation on equity market liquidity

Roger Silvers (University of Utah)


Academic Biography

Roger Silvers is currently an Assistant Professor in the Accounting Department at the University of Utah. Previously, he was a Visiting Academic Fellow (Senior Economist) and a Visiting Professor at the University of Virginia. He holds an MA from the University of Massachusetts, and a BA from Lynchburg College.

Roger was the winner of this year’s Best Paper, presented by Nej D’Jelal, Head of Electronic Equites, EMEA, Barclays and Plato Partnership Co-Chair and Andrei Kirilenko, Director, Centre for Global Finance and Technology, Imperial Business School.


About the paper

Roger’s paper examines how cooperation between national securities regulators affects equity market liquidity by using the International Organization of Securities Commissions’ (IOSCO’s) Multilateral Memorandum of Understanding (MMoU) as a shock to cooperation.


Roger’s original cross-sectional tests show that legal, cultural, economic and business-level attributes condition the effect – shedding light on how cooperation works, and what makes it effective.


Main Takeaways

While globalisation has made international cooperation between securities regulators increasingly important, very little attention has previously been paid towards it. Cross-border transactions increase adverse selection risks because the counterparties in a firm’s home market often have access to better and more timely information about a security’s vale.


In his paper, Roger Silvers has demonstrated empirical evidence that shows how cooperation between regulators influences capital markets. This clearly has important implications for companies, markets, regulators and investors.


Roger Silvers shows that the IOSCO’s cross-border regulatory tool, the MMoU, is associated with large increases in liquidity – especially for host shares – as indicated by narrower quoted bid-ask spreads.


Numerous features of the identification strategy make it unlikely that there are other events which drive increases in liquidity:


  • The MMoU was initially created as an anti-terrorism effort, not a response to a market cycle;
  • The three-dimensionally staggered nature of the MMoU reduces the likelihood that omitted variables are responsible for these results;
  • When each new country adopts the MMoU, multiple multinational links are developed simultaneously’
  • The effects of the MMoU are concentrated in subsets of shares;
  • Tests created by Roger Silvers rule out alternative explanations


This research is timely, given recent expansions in cross-border portfolio investment and new levels of regulation.