Automation, speed, and stock market quality: The NYSE's Hybrid
Automation and trading speed are increasingly important aspects of competition among financial markets. Yet we know little about how changing a market's automation and speed affects the cost of immediacy and price discovery, two key dimensions of market quality. At the end of 2006 the New York Stock Exchange introduced its Hybrid Market, increasing automation and reducing the execution time for market orders from 10 seconds to less than one second. We find that the change raises the cost of immediacy (bid-ask spreads) because of increased adverse selection and reduces the noise in prices, making prices more efficient.
Year of publication: |
2011
|
---|---|
Authors: | Hendershott, Terrence ; Moulton, Pamela C. |
Published in: |
Journal of Financial Markets. - Elsevier, ISSN 1386-4181. - Vol. 14.2011, 4, p. 568-604
|
Publisher: |
Elsevier |
Keywords: | Automation Liquidity Speed Transparency Latency Adverse selection |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
Time Variation in Liquidity: The Role of Market-Maker Inventories and Revenues
COMERTON-FORDE, CAROLE, (2010)
-
Time variation in liquidity : the role of market-maker inventories and revenues
Comerton-Forde, Carole, (2010)
-
Automation, speed, and stock market quality : the NYSE's Hybrid
Hendershott, Terrence, (2011)
- More ...