Market Structure, Fragmentation and Market Quality - Evidence from Recent Listing Switches

48 Pages Posted: 28 May 2004

See all articles by Li Wei

Li Wei

New York Stock Exchange NYSE - Strategy and Research

Paul B. Bennett

Fordham University Business School

Date Written: December 23, 2003

Abstract

Have structural changes in the U.S. equities markets, such as decimalization, the growth of ECNs, and the improvements in order routing technologies altered the advantages of stock exchange relative to decentralized dealer and ECN trading? We examine market quality for companies that recently switch listings from Nasdaq to the NYSE. We find these stocks show significant reductions in return volatilities and price reversals, quoted spreads, and trading costs. The improvements are greater for companies whose pre-switch order flows are more fragmented, consistent with the notion that order flow consolidation improves market quality. Our findings are not influenced by sample selection bias.

Keywords: Market Fragmentation, Market Quality, Best Execution

JEL Classification: G23, G24

Suggested Citation

Wei, Li and Bennett, Paul B., Market Structure, Fragmentation and Market Quality - Evidence from Recent Listing Switches (December 23, 2003). Available at SSRN: https://ssrn.com/abstract=497574 or http://dx.doi.org/10.2139/ssrn.497574

Li Wei (Contact Author)

New York Stock Exchange NYSE - Strategy and Research ( email )

11 Wall Street
New York, NY 10005
United States

Paul B. Bennett

Fordham University Business School ( email )

1790 Broadway
New York
New York, NY 10019
United States
917 434 0226 (Phone)

HOME PAGE: http://business.fordham.edu/faculty/bennett

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