A Comparison of Equity Limit Order Execution Quality Across Trading Venues
Robert H. Battalio
University of Notre Dame - Department of Finance
Jason T. Greene
Southern Illinois University
Brian C. Hatch
University of Cincinnati - Department of Finance - Real Estate
Robert H. Jennings
Indiana University - Kelley School of Business - Department of Finance
The scant amount of extant research evaluating intermarket limit order execution quality does not control order characteristics or market conditions, making it difficult to compare execution quality across market centers. We analyze fill rates and execution times across different trading venues for comparable limit orders in NYSE-listed equities. We introduce a new methodology for estimating if/when hypothetical limit orders execute and we demonstrate its accuracy. Contrary to extant work, our naive simulations suggest that the NYSE provides higher fill rates and faster fill times, on average, than regional stock exchanges. Additional analyses, however, suggest that regional exchanges and individual brokerage firms provide execution systems making the regionals' limit order execution quality no worse than and possibly superior to New York's.
JEL Classification: G10, G18
Date posted: August 10, 1998
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