Auction and Dealer Markets: An Empirical Analysis of New York Stock Exchange Specialist Trading

NYSE working paper #94-01

Posted: 10 Aug 1999

See all articles by Ananth Madhavan

Ananth Madhavan

BlackRock, Inc.

George Sofianos

affiliation not provided to SSRN

Date Written: August 1994

Abstract

This paper uses specialist transaction data to examine the magnitude and determinants of NYSE specialist dealer trading in their assigned stocks. Specialist dealer trading varies widely across stocks. At one extreme, in 7 percent of the sampled stocks the specialist participation rate exceeds 60 percent; these stocks essentially trade in a dealer market. At the other extreme, in 17 percent of the sampled stocks the specialist participation rate is less than 10 percent; these stocks trade in what approximates a pure auction market with minimal specialist dealer trading. Specialist dealer trading is related to the composition of volume and other stock- specific characteristics. In particular, specialist trading rises with nonblock volume but declines with block volume. We also analyze the determinants of specialist participation in a given stock over time. We find that specialists are more likely to buy when their inventory is low and sell when their inventory is high.

JEL Classification: G14

Suggested Citation

Madhavan, Ananth and Sofianos, George, Auction and Dealer Markets: An Empirical Analysis of New York Stock Exchange Specialist Trading (August 1994). NYSE working paper #94-01. Available at SSRN: https://ssrn.com/abstract=5537

Ananth Madhavan (Contact Author)

BlackRock, Inc. ( email )

400 Howard Street
San Francisco, CA 94105
United States

George Sofianos

affiliation not provided to SSRN

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