Payments for Order Flow on Nasdaq
We present a model of Nasdaq that includes the two ways in which marketmakers compete for order flow: quotes and direct payments. Brokers in our model can execute small trades through a computerized system, preferencing arrangements with marketmakers, or vertical integration into market making. The comparative statics in our model differ from those of the traditional model of dealer markets, which does not capture important institutional features of Nasdaq. We also show that the empirical evidence is inconsistent with the traditional model, which suggests that preferencing and vertical integration are important components in understanding Nasdaq. Copyright The American Finance Association 1999.
Year of publication: |
1999
|
---|---|
Authors: | Kandel, Eugene ; Marx, Leslie M. |
Published in: |
Journal of Finance. - American Finance Association - AFA, ISSN 1540-6261. - Vol. 54.1999, 1, p. 35-66
|
Publisher: |
American Finance Association - AFA |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Nasdaq market structure and spread patterns
Kandel, Eugene, (1997)
-
The Effects of Transaction Costs on Stock Prices and Trading Volume
Barclay, Michael J., (1998)
-
Nasdaq market structure and spread patterns
Kandel, Eugene, (1997)
- More ...