Transaction Cost Economics and Competitiveness in European FMIs: A Cross-Jurisdictional PLS-SEM Multi-Group Analysis

Abstract

Aims: This study examines how MiFID II/MiFIR have reshaped transaction costs and competitive dynamics in European financial market infrastructures by analyzing the structural interactions among trading activity, market economics, operational intensity, and cost formation. It further contributes to the scientific literature by integrating Transaction Cost Economics with PLS-SEM and permutation-based MGA to assess regulatory impact across heterogeneous institutions. Study Design: A cross-jurisdictional, comparative design using Partial Least Squares Structural Equation Modeling (PLS-SEM) and permutation-based Multi-Group Analysis (MGA). Place and Duration of Study: Two anonymized European financial market infrastructure provider (2012–2023). Methodology: The analysis is based on 120 observations and 31 indicators drawn from audited financial and exchange reports, and historical trading statistics. Structural relationships were estimated using PLS-SEM with 5,000 bootstrap subsamples, followed by a 10,000-permutation Multi-Group Analysis to assess cross-institutional differences and regulatory effects. Results: ABC Group exhibits a volume-dependent cost structure shaped by trading activity and market scale, whereas XYZ Group shows a more efficiency-driven, technology-oriented pattern. Three of five hypothesized inter-group differences are statistically significant, underscoring the relevance of organizational design and strategic orientation in moderating regulatory impact. Conclusion: The findings show that MiFID II/MiFIR generate heterogeneous regulatory effects across financial market infrastructures, influenced by technological maturity and operational configuration. These insights advance theoretical understanding of transaction cost formation and offer conceptual implications for assessing competitiveness in regulated market ecosystems.