Market Maker Quotation Behavior and Pretrade Transparency

Posted: 2 Sep 2003

See all articles by Yusif Simaan

Yusif Simaan

Fordham University - Gabelli School of Business

Daniel G. Weaver

Rutgers Business School

David K. Whitcomb

Rutgers University, Newark, School of Business-Newark, Department of Finance & Economics

Abstract

We examine the impact of differing levels of pretrade transparency on the quotation behavior of Nasdaq market makers. We find that market makers are more likely to quote on odd ticks, and to actively narrow the spread, when they can do so anonymously by posting limit orders on Electronic Communication Networks (ECNs). From a public policy perspective, our findings suggest that making the level of pretrade transparency on Nasdaq more opaque by allowing anonymous quotes could improve price competition and narrow spreads further.

Suggested Citation

Simaan, Yusif and Weaver, Daniel G. and Whitcomb, David K., Market Maker Quotation Behavior and Pretrade Transparency. Journal of Finance, Vol. 58, pp. 1247-1268, June 2003. Available at SSRN: https://ssrn.com/abstract=411144

Yusif Simaan (Contact Author)

Fordham University - Gabelli School of Business ( email )

113 West 60th Street
Dept. of Finance
New York, NY 10023
United States
212-636-6116 (Phone)

Daniel G. Weaver

Rutgers Business School ( email )

94 Rockafeller Road
Piscataway, NJ 08854
United States
848.445.5644 (Phone)
732.445.2333 (Fax)

HOME PAGE: http://weaver.rutgers.edu

David K. Whitcomb

Rutgers University, Newark, School of Business-Newark, Department of Finance & Economics ( email )

111 Washington Avenue
Newark, NJ 07102
United States
212-228-2388 (Phone)
212-674-0040 (Fax)

Register to save articles to
your library

Register

Paper statistics

Abstract Views
1,129
PlumX Metrics