Preferencing, internalization, best execution, and dealer profits

• 成果类型: Article
• 署名作者: Hansch, O; Naik, NY; Viswanathan, S
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park; University of London; London Business School; Duke University; University of London; Birkbeck University London; University of Pennsylvania
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/0022-1082.00167
• 发表日期: 1999
• 页码: 1799-1828
• 关键词: AVOID ODD-8TH QUOTES; Bid-ask spreads; Market makers; Nasdaq; NYSE; COMPETITION; exchange; trades; COSTS; specialists

摘要

The practices of preferencing and internalization have been alleged to support collusion, cause worse execution, and lead to wider spreads in dealership style markets relative to auction style markets. For a sample of London Stock Exchange stocks, we find that preferenced trades pay higher spreads, however they do not generate higher dealer profits. Internalized trades pay lower, not higher, spreads. We do not find a relation between the extent of preferencing or internalization and spreads across stocks. These results do not lend support to the collusion hypothesis but are consistent with a costly search and trading relationships hypothesis.