The dynamics of dealer markets and trading costs |
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| Authors: | Kee H Chung Youngsoo Kim |
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| Institution: | aSchool of Management, State University of New York at Buffalo, 356 Jacobs Management Center, Buffalo, NY 14260-4000, USA;bFaculty of Administration, University of Regina, 3737 Wascana Parkway, Regina, SK, Canada S4S0A2 |
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| Abstract: | In this study we examine the temporal dynamics of dealer market share and their ramification for competition and trading costs using a large sample of NASDAQ securities. Our results show that although the total market share of the top five dealers is relatively stable over time, there is significant monthly variation in the composition of the top five dealers. We show that market share turbulence among top dealers is another form of competition that narrows bid–ask spreads, especially for stocks with less competitive market structure. |
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| Keywords: | Dealer market Market concentration Competition Turbulence Market structure Bid– ask spreads |
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