Bid-ask spreads and the avoidance of odd-eight quotas on Nasdaq: an examination of exchange listings
Article Abstract:
Four hundred seventy-two securities which were traded on the Nasdaq and moved to the New York Stock Exchange (NYSE) or American Stock Exchange (Amex) in the period between 1983 and 1992 were examined to clarify previous studies by Christie and Huang (1994). Results indicate that security-specific traits do not account for higher bid-ask spreads on the Nasdaq compared to the NYSE or Amex when avoiding odd-eight quotes. Contrary to previous results, the avoidance of odd-eight quotes is employed as a method to facilitate supra-competitive bid-ask spreads by Nasdaq securities traders.
Publication Name: Journal of Financial Economics
Subject: Economics
ISSN: 0304-405X
Year: 1997
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The importance of firm quotes and rapid executions: evidence from the January 1994 SOES rules change
Article Abstract:
Trading activity in the twenty largest stock listings at the Nasdaq markets that diminished the greatest Small Order Execution System (SOES) from 1000 to 500 shares was analyzed during the change in rule. The SOES is a computerized system which allows the execution of orders from outside brokerage firms and faster processing of transactions. Results show that trading during the regulation change corresponding to 1000-share orders was reduced from 26% to 17%, and trades corresponding to 500-share orders were increased from 8% to 17%.
Publication Name: Journal of Financial Economics
Subject: Economics
ISSN: 0304-405X
Year: 1997
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Why Nasdaq market makers avoid odd-eighth quotes
Article Abstract:
Recent studies on Nasdaq price quotes attribute the clustering of quotes on even-eighth price fractions and the near-zero frequency of odd-eight price fractions on collusion among market makers. Preference trading is examined as an alternative to collusion in explaining the few-odd-eighths phenomenon. Findings indicate that price fraction distribution across securities is determined by exogenous economic characteristics. The results are contrary to the results supporting the collusion theory.
Publication Name: Journal of Financial Economics
Subject: Economics
ISSN: 0304-405X
Year: 1996
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