Dually-Traded Italian Equities: London vs. Milan

Italian blue chip stocks are now actively trade in two markets: the dealers' market of SEAQ International in London and the traditional auction market in Milan. Analyzing their interaction, we find that: 

1. the London market for Italian equities has grown rapidly relative to the Milan stock exchange, but has not reduced trading volume in Milan;
2. Milan prices are generally -- but not always -- within London quotes; 
3. London market makers appear to use price information from Milan to set their quotes, but this informational spillover is rather weak; 
4. the growth of the London market for Italian stocks is probably due less to cost factors than to its other characteristics, such as greater depth and immediacy, location and other features typical of dealership markets.

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