Quote-Based Competition, Market Share, and Execution Quality in Nasdaq-Listed Securities
43 Pages Posted: 2 Jan 2007
Abstract
We show that competitive quotes help increase dealer market share on NASDAQ, despite the fact that a large proportion of order flow is preferenced. We find that decimal pricing and the introduction of new trading platforms such as SuperSOES and SuperMontage have significantly changed the effect of quote aggressiveness on dealer market share. In particular, decimal pricing reduces (increases) the price (size) elasticity, SuperSOES increases the size elasticity, and SuperMontage increases both the size and price elasticity of dealer market share. We also show that market centers provide greater price improvements and faster executions when they post competitive quotes.
Keywords: Dealer market share, Quote aggressiveness, Order preferencing, Decimalization, SuperSOES, SuperMontage
JEL Classification: G18, G19
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Using Matched Samples to Test for Differences in Trade Execution Costs
By Ryan J. Davies and Sang Soo Kim
-
Competition in the Market for Nasdaq Securities
By Michael A. Goldstein, Andriy Shkilko, ...
-
Measures of Implicit Trading Costs and Buy-Sell Asymmetry
By Gang Hu
-
Locked and Crossed Markets on Nasdaq and the Nyse
By Andriy Shkilko, Bonnie F. Van Ness, ...
-
Clean Sweep: Informed Trading Through Intermarket Sweep Orders
By Sugato Chakravarty, Pankaj K. Jain, ...
-
Market Structure, Fragmentation and Market Quality - Evidence from Recent Listing Switches
By Li Wei and Paul B. Bennett
-
Price and Quantity Quotes on NASDAQ: A Study of Dealer Quotation Behavior
By Kee H. Chung and Xin Zhao
-
Is Market Fragmentation Harming Market Quality?
By Maureen O'hara and Mao Ye
-
Short- and Long-Term Effects of Multimarket Trading
By Vanthuan Nguyen, Bonnie F. Van Ness, ...