Payments for order flow on Nasdaq

• 成果类型: Article
• 署名作者: Kandel, E; Marx, LM
• 署名单位: Hebrew University of Jerusalem; University of Rochester
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/0022-1082.00098
• 发表日期: 1999
• 页码: 35-66
• 关键词: AVOID ODD-8TH QUOTES; MARKET; COMPETITION

摘要

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.