Market Maker Quotation Behavior and Pretrade Transparency
We examine the impact of differing levels of pretrade transparency on the quotation behavior of Nasdaq market makers. We find that market makers are more likely to quote on odd ticks, and to actively narrow the spread, when they can do so anonymously by posting limit orders on Electronic Communication Networks (ECNs). From a public policy perspective, our findings suggest that making the level of pretrade transparency on Nasdaq more opaque by allowing anonymous quotes could improve price competition and narrow spreads further. Copyright 2003 by the American Finance Association.
Year of publication: |
2003
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Authors: | Simaan, Yusif ; Weaver, Daniel G. ; Whitcomb, David K. |
Published in: |
Journal of Finance. - American Finance Association - AFA, ISSN 1540-6261. - Vol. 58.2003, 3, p. 1247-1268
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Publisher: |
American Finance Association - AFA |
Saved in:
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