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This dissertation examines the impact of differential implicit and explicit transaction costs on market and instrument choice when liquidity has fragmented. Contributions to the literature are made by addressing a number of fundamental questions that have received scarce consideration in the existing literature. The empirical literature on market choice and the impact of fragmentation on market quality focuses on the spread and depth dimensions of liquidity, given that these are the first—order determinants of a transaction’s implicit cost. However, seminal theoretical literature identifies quote resiliency, defined as the rate at which new passive orders arrive, as an incremental dimension of liquidity. The first study of this dissertation extends the extant empirical literature on market choice to consider the relative contribution of liquidity dimensions, particularly resiliency, to the utility a trader derives when choosing a market from alternatives. Resiliency is likely to be of importance in an environment characterised by high—frequency interactions, as resilient quotes partially mitigate the risk that an offer to supply liquidity is withdrawn while an aggressive order is in transmission to the chosen market. Unlike the previous literature, which models competing markets one at a time, this study develops a single model for the choice decision across all fragmented markets. This parameterisation is significant as it allows the relative importance of the various dimensions of liquidity to be directly compared. The second study fills a void in the burgeoning literature on the market quality impact of heightened participation by algorithmic traders. Previous published studies have only examined the impact of increased algorithmic participation on individual markets. This study exploits the natural experiment presented by the duopolistic market for trading FTSE 100 index constituents shortly after the November 2007 introduction of the Markets in Financial Instruments Directive in Europe. The behaviour of passive offers to supply liquidity which are withdrawn at varying frequencies is contrasted for the incumbent London Stock Exchange and the entrant Chi—X Multilateral Trading Facility. The event of order cancellation is used to proxy participation by algorithmic traders on both markets and allows this study to further differentiate itself from the scarce existing literature by testing for Granger causality between heightened algorithmic participation and intraday volatility. Weak evidence is identified which suggests that proportionally greater participation by algorithmic traders does not catalyse future volatility. This result is then explored in a seemingly unrelated regression framework which effectively ‘conditions’ on cross-market events. The third study examines the temporal relationship between contracts for difference (CFDs) traded over-the-counter and exchange-traded cash equities. While the extant literature robustly considers temporal relationships between a range of derivatives and their underlying securities, none of this literature examines over-the-counter trading in CF Ds. A stamp duty exemption for CFDs in the United Kingdom creates an explicit transaction cost asymmetry which has fuelled the rapid growth of the CFD market and may be likely to attract informed traders to this instrument. This study identifies incremental support for the previously documented importance of transaction costs and leverage to informed traders selecting an instrument from alternatives. Previous literature suggests price discovery for cash equities is concentrated on exchanges instead of the over—thecounter market. This study capitalises on the unique structure of the CFD market in the United Kingdom to explore the established notion that the process of over-the-counter negotiation tends to screen out informed traders when interactions are repeated.