Quote Competitiveness, 100-Share Quotes, and Decimalization

Financial Review, 2011

20 Pages Posted: 6 Dec 2009 Last revised: 29 Nov 2012

See all articles by Ning Tang

Ning Tang

Wilfrid Laurier University

Andriy Shkilko

Wilfrid Laurier University - Lazaridis School of Business and Economics

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Date Written: November 29, 2009

Abstract

Existing literature documents a significant post-decimalization decline in inter-market quote competitiveness. We show that this result is due primarily to the decline in 100-share NBBO-matching quotes posted by NASDAQ. Particularly, after decimalization, such quotes decline by more than 90%. At the time, the inter-market trading system (ITS) regards 100-share quotes as meaningless. Such quotes are exempt from the trade-through rule and are generally ignored by ITS participants. We therefore argue that the major decline in quote competitiveness observed by the previous literature is largely nominal, and that decimalization had a much lesser impact on quote competitiveness than previously believed.

Keywords: Quote competitiveness, Decimalization, 100-share quotes

JEL Classification: G14, G18

Suggested Citation

Tang, Ning and Shkilko, Andriy, Quote Competitiveness, 100-Share Quotes, and Decimalization (November 29, 2009). Financial Review, 2011, Available at SSRN: https://ssrn.com/abstract=1515447

Ning Tang (Contact Author)

Wilfrid Laurier University ( email )

75 University Ave W
Waterloo, Ontario N2L 3C5
Canada

Andriy Shkilko

Wilfrid Laurier University - Lazaridis School of Business and Economics ( email )

LH 4050
75 University Ave. W.
Waterloo, Ontario N2L3C5
Canada
519.884.0710 ext. 2462 (Phone)
519.884.0201 (Fax)

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