Coexisting Exchange Platforms: Limit Order Books and Automated Market Makers

In this paper, the authors build a model of coexisting exchanges with two different market- making algorithms: a centralized exchange (CEX) with a traditional limit order book and a DEX with a CFMM. Traders are either informed or uninformed and endogenously choose their trading venue. We first analyze how the arrival of the CFMM affects adverse selection and liquidity on both exchanges.
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