Quotes, Order Flow, and Price Discovery
J. OF FINANCE, Vol. 52 No. 1, March 1997
Posted: 18 Dec 1996
The goal of this paper is to examine the impact of the 1975 Congressional mandate to integrate the trading of NYSE-listed stocks. The conclusions are: Most of the time, the NYSE quote matches or determines the best displayed quote, and the NYSE is the most frequent initiator of quote changes. Non-NYSE markets attract a significant portion of their volume when they are posting inferior bids or offers, indicating they obtain order flow for other reasons, such as "payment order flow." Yet, when a non-NYSE market does post a better bid or offer, it does attract additional order flow.
JEL Classification: G19
Suggested Citation: Suggested Citation