Market Maker Quotation Behavior and Pretrade Transparency

  • Author(s): Yusif Simaan, Daniel G. Weaver, David K. Whitcomb
  • Published: May 06, 2003
  • Pages: 1247-1268
  • DOI: 10.1111/1540-6261.00565

Abstract

We examine the impact of differing levels of pretrade transparency on the quotation behavior of Nasdaq market makers. We find that market makers are more likely to quote on odd ticks, and to actively narrow the spread, when they can do so anonymously by posting limit orders on Electronic Communication Networks (ECNs). From a public policy perspective, our findings suggest that making the level of pretrade transparency on Nasdaq more opaque by allowing anonymous quotes could improve price competition and narrow spreads further.

Jump to menu

Main Navigation

Search the Site / Journal

Search Keywords

Search Tips

Members' Login

Credentials

Members' Options

Site Footer

View Mobile Version