Quote Competitiveness, 100-share Quotes, and Decimalization

13 Pages Posted: 10 Jan 2011

See all articles by Ning Tang

Ning Tang

Wilfrid Laurier University

Andriy Shkilko

Wilfrid Laurier University - Lazaridis School of Business and Economics

Gregory R. Stone

University of Nevada, Reno

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Abstract

The finance literature documents a significant post-decimalization decline in intermarket quote competitiveness. We show that this result is due primarily to the decline in 100-share NBBO-matching quotes posted by NASDAQ. After decimalization, such quotes decline by more than 90%. At that time, the intermarket trading system (ITS) regards 100-share quotes as meaningless; these 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 previous research is largely nominal, and that decimalization had a much lesser impact on quote competitiveness than previously believed.

Keywords: quote competitiveness, NYSE, NASDSAQ, regional exchanges, decimalization, 100-share quotes, autoquotes

JEL Classification: G14, G18

Suggested Citation

Tang, Ning and Shkilko, Andriy and Stone, Gregory R., Quote Competitiveness, 100-share Quotes, and Decimalization. Financial Review, Vol. 46, No. 1, pp. 89-101, 2011, Available at SSRN: https://ssrn.com/abstract=1736913 or http://dx.doi.org/10.1111/j.1540-6288.2010.00291.x

Ning Tang

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)

Gregory R. Stone

University of Nevada, Reno ( email )

United States
775 682-9174 (Phone)
775 784-1769 (Fax)

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