RT Journal Article SR Electronic T1 The Effect of Brokers on the Dynamics of a Walrasian Auction JF The Journal of Trading FD Institutional Investor Journals SP 54 OP 64 DO 10.3905/jot.2013.8.4.054 VO 8 IS 4 A1 Philippe Gregoire A1 James Eaves A1 Michel Gendron A1 Manel Kammoun YR 2013 UL https://pm-research.com/content/8/4/54.abstract AB We study the effect of the presence of brokers in an experimental exchange market using the Walrasian tâtonnement mechanism. We find that brokers tend to act as liquidity providers, submitting orders likely to equilibrate supply and demand given the orders they receive from other participants. As a result, average excess demand and prices are less volatile, and markets reach equilibrium more often, when brokers are present compared with the case without brokers. Brokers’ liquidity-providing behavior is more pronounced when their compensation includes, in addition to their trading profit, a component related to trading volume when equilibrium is reached. Under-revelation, a strategic behavior inherent to Walrasian auctions, is about the same with and without brokers when markets clear, yielding similar levels of market efficiency, measured as total surplus divided by potential surplus.TOPICS: Exchanges/markets/clearinghouses, volatility measures