Do NASDAQ Market Makers Paint the Tape?
Posted: 26 Aug 1999
Date Written: December 1994
We examine NASD compliance with the Securities and Exchange Commission's (SEC) mandate that all trades be reported within 90 seconds of completion and in sequence. We find a substantial number of out-of-sequence trades both on an absolute level and when compared to out-of-sequence reporting on the combined centralized exchanges. We investigate possible explanations and find little or no support for the NASD sanctioned violations of lost trading ticket, computer malfunction, or abnormal volume, and only minimal support for firm size and trade size hypotheses. Evidence exists suggesting dealers could use late trades for management of margin accounts, delay of information, or for hiding inventory adjustments.
JEL Classification: G14
Suggested Citation: Suggested Citation