The Demise of the NYSE and NASDAQ: Market Quality in the Age of Market Fragmentation

73 Pages Posted: 10 Apr 2015 Last revised: 4 May 2022

See all articles by Peter H. Haslag

Peter H. Haslag

Vanderbilt University - Finance

Matthew C. Ringgenberg

University of Utah - Department of Finance

Date Written: April 30, 2022

Abstract

U.S. equity exchanges have experienced a dramatic increase in competition from new entrants, resulting in the fragmentation of trading across venues. While market quality has generally improved over this period, we show most of the improvements have accrued to the largest stocks. We then show this bifurcation in market quality is related to the fragmentation of trading. Theoretically, more exchange competition should reduce trading costs, yet it may also increase adverse selection for liquidity providers, leading to higher spreads. We document evidence of both effects -- fragmentation improves market quality for large stocks while small stocks experience relatively worse quality.

Keywords: Exchange competition, fragmentation, liquidity, market microstructure

JEL Classification: G12, G14

Suggested Citation

Haslag, Peter H. and Ringgenberg, Matthew C., The Demise of the NYSE and NASDAQ: Market Quality in the Age of Market Fragmentation (April 30, 2022). Journal of Financial and Quantitative Analysis, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2591715 or http://dx.doi.org/10.2139/ssrn.2591715

Peter H. Haslag

Vanderbilt University - Finance ( email )

401 21st Avenue South
Nashville, TN 37203
United States

HOME PAGE: http://https://www.sites.google.com/site/peterhaslag/

Matthew C. Ringgenberg (Contact Author)

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
752
Abstract Views
4,141
rank
49,690
PlumX Metrics