Differences in Execution Prices Among the NYSE, the Regionals, and the NASD

Abstract

The purpose of this paper is to compare execution prices of NYSE-listed stocks on the NYSE and on non-NYSE markets. The first conclusion of this comparison is that most of the time the NYSE had the best quote. This result does not necessarily imply that execution prices on the NYSE are better than the regionals since an investor should always receive an execution price no worse that the best intermarket quote regardless of the particular market on which an order is executed. The second conclusion is that there is more price improvement on the NYSE than on other markets for NYSE-listed stocks. The third conclusion is that the average price improvement from trading on the NYSE varies according to the price of the stock and the size of the transaction. On a 100-share transaction of a 40-dollar stock, the price improvement on the NYSE is on average 1.5 cents greater than that on non-NYSE markets.

Keywords: market microstructure, price improvement, NYSE, intermarket competition

JEL Classification: G10, G18, G19, G28