The specialist's discretion: Stopped orders and price improvement

• 成果类型: Article
• 署名作者: Ready, MJ
• 署名单位: University of Wisconsin System; University of Wisconsin Madison
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/12.5.1075
• 发表日期: 1999
• 页码: 1075
• 关键词: Limit orders; MARKET; spreads

摘要

When a market order arrives, the NYSE specialist can offer a price one tick better than the limit orders on the book and trade for his own account. Alternatively, the specialist can stop the market order, which means he guarantees execution at the current quote but provides the possibility of price improvement. My model shows that specialists can use stops to sample the future order flow before making a commitment to trade. I present empirical evidence that both stops and immediate price improvement impose adverse selection costs on limit order traders.