Order preferencing and market quality on NASDAQ before and after decimalization

• 成果类型: Article
• 署名作者: Chung, KH; Chuwonganant, C; McCormick, DT
• 署名单位: State University of New York (SUNY) System; University at Buffalo, SUNY; Purdue University System; Indiana University Purdue University Fort Wayne
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/S0304-405X(03)00174-0
• 发表日期: 2004
• 页码: 581-612
• 关键词: Decimalization; internalization; Payment for order flow; quote aggressiveness; spreads; Execution quality

摘要

Despite the widely held belief that order preferencing affects market quality, no hard evidence exists on the extent and determinants of order preferencing and its impact on dealer competition and execution quality. This study shows that the bid-ask spread (dealer quote aggressiveness) is positively (negatively) related to the proportion of internalized volume during both the pre- and post-decimalization periods. Although decimal pricing led to lower order preferencing on NASDAQ, the extent of order preferencing after decimalization is higher than what prior studies had predicted. The price impact of preferenced trades is smaller than that of unpreferenced trades and preferenced trades receive greater (smaller) size (price) improvements than unpreferenced trades. (C) 2003 Elsevier B.V. All rights reserved.