On the Integration of the Us Equity Markets

Rodney L. White Center for Financial Research Working Paper No. 1-95

Posted: 8 Sep 1999

See all articles by Marshall E. Blume

Marshall E. Blume

University of Pennsylvania - Finance Department

Michael A. Goldstein

Babson College - Finance Division

Abstract

In response to the 1975 Congressional call for a national market system to provide a transparent link across individual markets that trade NYSE-listed stocks, the SEC caused the implementation of three electronic systems that provide a partial integration of these markets. This partial integration together with the trading process on the NYSE floor has created market niches in which non-NYSE markets can prosper. Empirically, the bid and asked prices of the NYSE quote are the primary determinant of the best displayed prices. Non-NYSE markets attract a significant portion of their volume for reasons other than matching or bettering the NYSE quote, such as "payment for order flow." This fragmentation of trading is a logical outgrowth of the SEC- imposed partial integration and the trading process on the NYSE floor.

JEL Classification: G24

Suggested Citation

Blume, Marshall E. and Goldstein, Michael A., On the Integration of the Us Equity Markets. Rodney L. White Center for Financial Research Working Paper No. 1-95. Available at SSRN: https://ssrn.com/abstract=6036

Marshall E. Blume (Contact Author)

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
215-898-7616 (Phone)
215-573-8084 (Fax)

Michael A. Goldstein

Babson College - Finance Division ( email )

320 Tomasso Hall
Babson Park, MA 02457-0310
United States
781-239-4402 (Phone)
781-239-5004 (Fax)

HOME PAGE: http://faculty.babson.edu/goldstein/

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