Order Flow Distribution, Bid–Ask Spreads, and Liquidity Costs: Merrill Lynch's Decision to Cease Routinely Routing Orders to Regional Stock Exchanges |
| |
| Authors: | Robert Battalio Jason Greene Robert Jennings |
| |
| Affiliation: | aGeorgia State University, Atlanta, Georgia, 30303;bNational Association of Securities Dealers, Inc. Washington, DC, 20006;cIndiana University, Bloomington, Indiana, 47405 |
| |
| Abstract: | Merrill Lynch's decision to redirect order flow in exchange-listed equity securities from regional exchanges to the New York Stock Exchange (NYSE) provides an opportunity to examine (1) whether order flow affects market makers' spread-setting behavior and (2) whether brokers can capture liquidity-cost differences between market centers for their customers. Merrill's market-order customers appear to obtain better prices on the NYSE than on the regionals. Consistently with market microstructure theory, the NYSE's quoted spread for stocks affected by Merrill's decision falls relative to a control sample and decreases absolutely for a subsample of stocks we believe most sensitive to order-flow distribution.Journal of Economic LiteratureClassification Numbers: D40, G10. |
| |
| Keywords: | |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
