The World Federation of Exchanges has published a paper, Key Attributes of Exchanges: Harnessing Network Effects, arguing that network effects are a defining feature of public markets and underpin their effectiveness, with implications for public policy. The paper describes exchanges as “all-to-all” networks that bring a broad range of participants into transparent, rules-based markets, concentrating liquidity, strengthening price discovery and supporting investor protection and overall market quality. It also links exchanges’ network effects to scalability, innovation and operational resilience, and highlights how central counterparties reinforce these benefits through multilateral netting and counterparty risk management, supporting stability and more efficient use of capital. The WFE flags risks from fragmented market structures, noting that dispersing trading activity across less transparent or bilateral channels can weaken network benefits and adversely affect liquidity, price formation and market quality.
World Federation of Exchanges 2026-04-15
World Federation of Exchanges publishes paper warning that liquidity fragmentation can weaken exchange network effects
The World Federation of Exchanges has published a paper arguing that network effects are a defining feature of public markets and underpin their effectiveness, with implications for public policy. It highlights how exchanges’ “all-to-all” networks and central counterparties support liquidity, price discovery, investor protection, innovation and resilience, while warning that fragmented and less transparent market structures can erode these benefits and harm overall market quality.