Information-Based Trading in Dealer and Auction Markets: An Analysis of Exchange Listings
58 Pages Posted: 24 Oct 2001
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Information-Based Trading in Dealer and Auction Markets: An Analysis of Exchange Listings
Date Written: August 30, 2001
Abstract
Are auction markets or dealer markets better able to identify informed traders? Our analysis of firms that transfer to an alternative exchange structure indicates that traders are more anonymous in a competing dealer market than in an auction environment. Our evidence also shows that the associated changes in the probability of trading with an informed trader are related to changes in the bid-ask spread. The reduction in bid-ask spreads are more pronounced for firms with higher probability of transacting with an informed trader prior to the relocation from a dealer to an auction market.
Keywords: Market Microstructure, Information-Based Trading, Trader Anonymity, Trading Costs, Exchange Listing
JEL Classification: G10, G14, D82
Suggested Citation: Suggested Citation
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