Competing with the NYSE
55 Pages Posted: 25 Aug 2005
Date Written: March 2006
We study the stock exchange rivalry between the New York Stock Exchange (NYSE) and the Consolidated Stock Exchange (Consolidated) from 1885 to 1926. The magnitude of this important, but largely forgotten rivalry was substantial: From 1885 to 1895, the ratio of Consolidated to NYSE volume averaged 40 percent and reached as high as 60 percent. The market share of the Consolidated averaged 23 percent for approximately 40 years. The Consolidated focused on the relatively liquid securities on the NYSE as measured by bid-ask spreads and trading volume. We find that bid-ask spreads fell by more than 10 percent when the Consolidated began to trade NYSE listed securities in 1885. The effect persisted over the entire history of the stock market rivalry. Our results suggest that the NYSE has faced significant long-run competition and may be susceptible to a similar level of competition in the future.
Keywords: stock exchange competition, bid-ask spreads
JEL Classification: G1, G2
Suggested Citation: Suggested Citation