Refusing the Best Price?

56 Pages Posted: 16 Feb 2021 Last revised: 8 May 2023

See all articles by Sida Li

Sida Li

Brandeis University

Mao Ye

University of Illinois at Urbana-Champaign

Miles Zheng

Texas Christian University - M.J. Neeley School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: December 27, 2020


The Regulation National Market System (Reg NMS) links fragmented stock exchanges by routing orders to the National Best Bid and Offer (NBBO). As the NBBO ignores exchange fees, 62% of routings lead to worse net prices. An increase in fee differences increases the market share captured by orders that refuse Reg NMS routings, particularly for stocks whose fees account for a large portion of transaction costs. Heterogeneous opportunity costs rationalize routing choices: non-routable orders entail lower non-execution costs than routable orders. Our results indicate that fees and clientele segmentation drive the proliferation of order types in the Reg NMS era.

Keywords: Regulation NMS, Order Types, Routing, Make/Take Fees, High-Frequency Trading

JEL Classification: G14, G18

Suggested Citation

Li, Sida and Ye, Mao and Zheng, Miles, Refusing the Best Price? (December 27, 2020). Available at SSRN: or

Sida Li

Brandeis University ( email )

Waltham, MA 02454
United States
2153509449 (Phone)

Mao Ye (Contact Author)

University of Illinois at Urbana-Champaign ( email )

Miles Zheng

Texas Christian University - M.J. Neeley School of Business ( email )

Fort Worth, TX 76129
United States

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