The Dynamics of Dealer Markets and Trading Costs

Chung, Kee H.; Kim, Youngsoo

doi:10.2139/ssrn.618745

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The Dynamics of Dealer Markets and Trading Costs

31 Pages Posted: 15 Nov 2004

See all articles by Kee H. Chung

Kee H. Chung

State University of New York at Buffalo - School of Management

In this study we examine the temporal dynamics of dealer market share and their ramification for competition and trading costs using a large sample of NASDAQ securities. Our results show that although the total market share of the top five dealers is relatively stable over time, there is significant monthly variation in the composition of the top five dealers. We show that market share turbulence among top dealers is another form of competition that narrows bid-ask spreads, especially for stocks with less competitive market structure.

Keywords: Dealer market, market concentration, competition, turbulence, market structure, bid-ask spreads

JEL Classification: G18, G19

Suggested Citation: Suggested Citation

Chung, Kee H. and Kim, Youngsoo, The Dynamics of Dealer Markets and Trading Costs. Available at SSRN: https://ssrn.com/abstract=618745 or http://dx.doi.org/10.2139/ssrn.618745