The Declining Role of NASDAQ Market Makers

20 Pages Posted: 26 Jul 2014

See all articles by Jared F. Egginton

Jared F. Egginton

Boise State University - College of Business & Economics

Date Written: August 2014

Abstract

We compare the liquidity providing behavior of NASDAQ market makers in 2010 to their behavior in 2004. We examine how frequently market makers are at the inside quote, what market and stock specific factors influence market makers’ behavior, and the relation between market maker participation and intraday bid‐ask spread patterns. We observe a decrease in the percent of the trading day dealers’ quote at the inside, a decline in the number of market makers, and a decrease in the influence market makers have on intraday spread patterns. The results suggest that the role of NASDAQ market makers declines over time.

Keywords: market structure, dealer markets, NASDAQ market makers, bid‐ask spreads

JEL Classification: G14, G18

Suggested Citation

Egginton, Jared Frank, The Declining Role of NASDAQ Market Makers (August 2014). Financial Review, Vol. 49, Issue 3, pp. 461-480, 2014, Available at SSRN: https://ssrn.com/abstract=2472192 or http://dx.doi.org/10.1111/fire.12045

Jared Frank Egginton (Contact Author)

Boise State University - College of Business & Economics ( email )

United States
2084264586 (Phone)

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