European Financial Management, Vol. 14, No. 2, 2008, 243–267 doi: 10.1111/j.1468-036X.2007.00413.x Dispersed Trading and the Prevention of Market Failure: the Case of the Copenhagen Stock Exchange David C. Porter College of Business and Economics, Department of Finance and Business Law, University of Wisconsin-Whitewater, Whitewater, WI 53190, USA E-mail: porterd@uww.edu Carsten Tanggaard Aarhus School of Business, Fuglesangs Alle 4, DK 8210 Aarhus V, Denmark E-mail: carsten@tanggaard.com Daniel G. Weaver and Wei Yu Department of Finance, Rutgers Business School, Rutgers University, 94 Rockafeller Road, Piscataway, NJ 08854-8054, USA E-mail: daniel weaver@rbsmail.rutgers.edu; kellyyu@pegasus.rutgers.edu Abstract With augmented demands on power grids resulting in longer and larger blackouts combined with heightened concerns of terrorist attacks, trading institutions and policy makers have widened their search for systems that avoid market failure during these disturbing events. We provide insight into this issue by examining trading behaviour at the Copenhagen Stock Exchange during a major blackout. We find that although market quality declined, markets remained functional and some price discovery occurred during the blackout period suggesting that the NOREX structure of interlinked trading systems combined with widely dispersed trading locations may be a viable means of protection against market failure during massive power disruptions or terrorist attacks. Keywords: power failure, fragmented markets, market failure JEL classification: G1, G14, G18 We thank the Copenhagen Stock Exchange for supplying the data. We thank Helle Søby- Thygesen from the Danish Securities Dealers Association, Kim Lilmose from Danske Bank, and Poul Erik Egeberg from the Copenhagen Stock Exchange for helpful discussions and Erik Fogtmann from Ritzau for providing copies of wires sent out by Ritzau during the power failure. The authors thank the editor, John Doukas, as well as an anonymous reviewer for helpful comments. All errors are our own. Correspondence: Daniel G. Weaver. C  2007 The Authors Journal compilation C  2007 Blackwell Publishing Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.