Quotes, Order Flow, and Price Discovery

Blume, Marshall E.; Goldstein, Michael A.

Quotes, Order Flow, and Price Discovery

J. OF FINANCE, Vol. 52 No. 1, March 1997

Posted: 18 Dec 1996

See all articles by Marshall E. Blume

Marshall E. Blume

University of Pennsylvania - Finance Department

Michael A. Goldstein

Babson College - Finance Division

There are 2 versions of this paper

Abstract

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

Blume, Marshall E. and Goldstein, Michael A., Quotes, Order Flow, and Price Discovery. J. OF FINANCE, Vol. 52 No. 1, March 1997. Available at SSRN: https://ssrn.com/abstract=8037