Market Structure and the Intraday Pattern of Bid-Ask Spreads for NASDAQ Securities PDF Download
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Author: K.C. Chan
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ISBN:
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Languages : en
Pages :
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This paper examines the intraday pattern of bid-ask spreads among NASDAQ stocks. We find that spreads are relatively stable throughout the day, but narrow significantly near the close. This contrasts with the U-shaped pattern for NYSE stocks reported by Brock and Kleidon (1992) and McInish and Wood (1992). We attribute these divergent patterns to structural differences between specialist and dealer markets. The wider spreads for NYSE stocks near periods of market closure may reflect the market power of specialists. The decline in spreads near the close for NASDAQ stocks is consistent with inventory control by individual dealers.
Author: K.C. Chan
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper examines the intraday pattern of bid-ask spreads among NASDAQ stocks. We find that spreads are relatively stable throughout the day, but narrow significantly near the close. This contrasts with the U-shaped pattern for NYSE stocks reported by Brock and Kleidon (1992) and McInish and Wood (1992). We attribute these divergent patterns to structural differences between specialist and dealer markets. The wider spreads for NYSE stocks near periods of market closure may reflect the market power of specialists. The decline in spreads near the close for NASDAQ stocks is consistent with inventory control by individual dealers.
Author: G. Geoffrey Booth
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ISBN:
Category :
Languages : de
Pages : 38
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Author: Eugene Kandel
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Category :
Languages : en
Pages :
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Author: Kalok Chan
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Languages : en
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We study the intraday behavior of bid-ask spreads for actively traded CBOE options and for their NYSE-traded underlying stocks. We confirm previous findings that stocks have a U-shaped spread pattern; however, the options display a very different intraday pattern--one that declines sharply after the open, and then levels off. Our results suggest that both the degree of competition in market making and the extent of informed trading are important for understanding the intraday behavior of spreads.
Author: Kee H. Chung
Publisher:
ISBN:
Category :
Languages : en
Pages : 25
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In this article we show that intraday variation in spreads for Nasdaq-listed stocks has converged to intraday variation in spreads for NYSE-listed stocks after the implementation of the new order handling rules. We attribute this convergence to the Limit Order Display Rule, which requires that limit orders be displayed in Nasdaq best bid and offer (BBO) when they are better than quotes posted by market makers. Our findings suggest that the different patterns of intraday spreads between NYSE and Nasdaq stock reported in prior studies can largely be attributed to the different treatments of limit orders between the NYSE and Nasdaq before the market reform.
Author: Hans R. Stoll
Publisher:
ISBN:
Category : Business & Economics
Languages : en
Pages : 88
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Author: Eugene Kandel
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Category :
Languages : en
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This paper argues that the standard competitive equilibrium result that prices will be driven down to the level of marginal cost cannot be routinely applied to the NASDAQ market without explicitly taking into account the institutional features of this market. We show that price competition among a large number of liquidity-providing dealers does not necessarily reduce spreads below the marginal cost of trading plus twice the exogenously set minimum tick size. We also discuss the existing explanations for the phenomenon of the odd-eighths avoidance documented in Christie and Schultz (1994) and provide an alternative explanation based on the concept of focal-point equilibria. The proposed explanation does not rule out the possibility of overt collusion, but shows that a simple coordination device may allow market makers to select the largest competitive equilibrium spread and thus attain profits similar to those possible with a formal collusive arrangement. We show that a different coordination device may be required for low-priced stocks because of their smaller tick size. Finally, we examine one month of data on NASDAQ quotes to illustrate the ideas of the paper. In particular we show that the frequency of odd-eighths avoidance increases dramatically as the minimum tick size declines. We also document that in our sample complete odd-eighths quotes avoidance tends to significantly increase the spread for otherwise comparable stocks.
Author: Stewart Mayhew
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Languages : en
Pages :
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This paper examines the effects of competition and market structure on the bid-ask spreads for stock options traded on the Chicago Board Options Exchange (CBOE) between 1986 and 1997. Options listed on multiple exchanges are found to have narrower spreads than those listed on a single exchange, but the difference is smaller for effective spreads than quoted spreads, and the effect diminishes as option volume increases. Option spreads become wider when a competing exchange delists the option. Options traded under a quot;Designated Primary MarketMakerquot; (DPM) are found to have narrower quoted spreads than those traded in a traditional open outcry crowd. Effective spreads are found to be slightly narrower under the DPM than in the crowd, but only since 1992, and only on low-volume options.
Author: Cheng Few Lee
Publisher: World Scientific
ISBN: 9814478830
Category : Business & Economics
Languages : en
Pages : 269
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Book Description
News Professor Cheng-Few Lee ranks #1 based on his publications in the 26 core finance journals, and #163 based on publications in the 7 leading finance journals (Source: Most Prolific Authors in the Finance Literature: 1959-2008 by Jean L Heck and Philip L Cooley (Saint Joseph's University and Trinity University). Market microstructure is the study of how markets operate and how transaction dynamics can affect security price formation and behavior. The impact of microstructure on all areas of finance has been increasingly apparent. Empirical microstructure has opened the door for improved transaction cost measurement, volatility dynamics and even asymmetric information measures, among others. Thus, this field is an important building block towards understanding today's financial markets. One of the pioneers in the field of market microstructure is David K Whitcomb, who retired from Rutgers University in 1999 after 25 years of service. David generously funded the David K Whitcomb Center for Research in Financial Services, located at Rutgers University. The Center organized a conference at Rutgers in his honor. This conference showcased papers and research conducted by the leading luminaries in the field of microstructure and drew a broad and illustrious audience of academicians, practitioners and former students, all who came to pay tribute to David K Whitcomb. Most of the papers in this volume were presented at that conference and the contributions to this volume are a lasting bookmark in microstructure. The coverage of topics on this volume is broad, ranging from the theoretical to empirical, and covering various issues from market architecture to liquidity and volatility.
Author: Cheng F. Lee
Publisher: World Scientific
ISBN: 9812386696
Category : Business & Economics
Languages : en
Pages : 235
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Book Description
"[These volumes are] and annual publication desinged to dissemiante developoments in the quantitative analysis of finance and accounting"-back cover of volume 1.
