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Information-Based Trading in Dealer and Auction Markets: An Analysis of Exchange Listings


Hans G. Heidle


U.S. Securities and Exchange Commission

Roger D. Huang


University of Notre Dame

Forthcoming in Journal of Financial and Quantitative Analysis

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

Accepted Paper Series


Date posted: December 10, 2001  

Suggested Citation

Heidle, Hans G. and Huang, Roger D., Information-Based Trading in Dealer and Auction Markets: An Analysis of Exchange Listings. Forthcoming in Journal of Financial and Quantitative Analysis. Available at SSRN: http://ssrn.com/abstract=293521

Contact Information

Hans G. Heidle (Contact Author)
U.S. Securities and Exchange Commission ( email )
100 F Street, NE
Washington, DC 20549
United States
202.551.3615 (Phone)
Roger D. Huang
University of Notre Dame ( email )
Mendoza College of Business
Notre Dame, IN 46556-5646
United States
574-631-6370 (Phone)
Feedback to SSRN (Beta)


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