Market Maker Quotation Behavior and Pretrade Transparency |
| |
Authors: | Yusif Simaan Daniel G. Weaver David K. Whitcomb |
| |
Affiliation: | Fordham University;, Baruch College;, Automated Trading Desk, Inc. and Rutgers University |
| |
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. |
| |
Keywords: | |
|
|