Transparency and Market Quality: Evidence from SuperMontage

Chung, Kee H.; Chuwonganant, Chairat

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Transparency and Market Quality: Evidence from SuperMontage

Journal of Financial Intermediation, Forthcoming

38 Pages Posted: 27 Dec 2007 Last revised: 31 May 2009

See all articles by Kee H. Chung

Kee H. Chung

State University of New York at Buffalo - School of Management

Chairat Chuwonganant

Kansas State University - Department of Finance

Abstract

In this study, we examine the effect of pre-trade transparency on market quality using data before and after the introduction of SuperMontage. Our results show that both bid-ask spreads and return volatility declined significantly after the implementation of SuperMontage. In addition, SuperMontage led to significant improvements in the SEC Rule 605 execution quality measures (e.g., faster executions and higher fill rates). Overall, our results indicate that SuperMontage improved market and execution quality on NASDAQ through greater pre-trade transparency and the integrated, more efficient quotation and trading system.

Keywords: Execution costs, Market quality, Liquidity, Market transparency, Market participants, Quote competition

JEL Classification: G18, G19

Suggested Citation: Suggested Citation

Chung, Kee H. and Chuwonganant, Chairat, Transparency and Market Quality: Evidence from SuperMontage. Journal of Financial Intermediation, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1078680