On the Integration of the Us Equity Markets
Rodney L. White Center for Financial Research Working Paper No. 1-95
Posted: 8 Sep 1999
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: Suggested Citation