Alternative Trading Systems

Posted: 16 Jul 2001

See all articles by Jennifer S. Conrad

Jennifer S. Conrad

University of North Carolina Kenan-Flagler Business School

Kevin M. Johnson


Sunil Wahal

Arizona State University (ASU) - Finance Department

Date Written: May 2001


Using proprietary data, we examine institutional orders and trades filled by alternative electronic trading systems. Our data consist of almost 800,000 orders (corresponding to 2.15 million trades) worth approximately $1.6 trillion, between the first quarter of 1996 and the first quarter of 1998. These data allow us to distinguish between orders filled by external crossing systems, electronic communication networks (ECNs) and traditional brokers. We find that external crossing systems are used largely to execute orders in listed stocks, while ECNs concentrate in Nasdaq stocks. On average, broker-filled orders are larger, have longer duration, and higher fill rates than orders executed by alternative trading systems. Controlling for variation in order characteristics, difficulty, and endogeneity in the choice of trading venue, we find that realized execution costs are substantially lower on external crossing systems and ECNs. Our results shed light on the emergence of alternative electronic trading systems that provide significant competition for order flow, for both exchanges and dealer markets.

JEL Classification: G10, G20

Suggested Citation

Conrad, Jennifer S. and Johnson, Kevin M. and Wahal, Sunil, Alternative Trading Systems (May 2001). Available at SSRN:

Jennifer S. Conrad

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

Kevin M. Johnson

Aronson+Johnson+Ortiz ( email )

230 South Broad Street
20th Floor
Philadelphia, PA 19102
United States
215-546-7500 (Phone)

Sunil Wahal (Contact Author)

Arizona State University (ASU) - Finance Department ( email )

W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States

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