TY - JOUR
T1 - A cross-exchange comparison of execution costs and information flow for NYSE-listed stocks
AU - Bessembinder, Hendrik
AU - Kaufman, Herbert M.
N1 - Funding Information:
The authors thank the New York Stock Exchange for partial financial support and for the provision of data for our earlier study (Bessembinder and Kaufman, 1996). We also thank Robert Battalio, Ed O'Malley, Bill Schwert (the editor), George Sofianos, Hans Stoll, and an anonymous refereel as well as participants at the NYSE conference 'The Search for the Best Price' and a University of Oklahoma research seminar, for valuable comments.
PY - 1997/12
Y1 - 1997/12
N2 - We examine execution costs for trades in NYSE issues completed on the NYSE, the NASD dealer market, and the regional stock exchanges during 1994. We find that effective bid-ask spreads are only slightly smaller at the NYSE. However, realized bid-ask spreads, which measure market-making revenue net of losses to better-informed traders but gross of inventory or order-processing costs, are lower on the NYSE by a factor of two to three. This differential is attributable to the successful 'cream skimming' of uninformed trades by off-NYSE market makers. These findings reinforce existing concerns about whether orders are routed so as to receive the best possible execution.
AB - We examine execution costs for trades in NYSE issues completed on the NYSE, the NASD dealer market, and the regional stock exchanges during 1994. We find that effective bid-ask spreads are only slightly smaller at the NYSE. However, realized bid-ask spreads, which measure market-making revenue net of losses to better-informed traders but gross of inventory or order-processing costs, are lower on the NYSE by a factor of two to three. This differential is attributable to the successful 'cream skimming' of uninformed trades by off-NYSE market makers. These findings reinforce existing concerns about whether orders are routed so as to receive the best possible execution.
KW - Cream skimming
KW - NASD dealer market
KW - Regional stock exchanges
KW - Trade execution costs
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U2 - 10.1016/S0304-405X(97)00032-9
DO - 10.1016/S0304-405X(97)00032-9
M3 - Article
AN - SCOPUS:0031521419
SN - 0304-405X
VL - 46
SP - 293
EP - 319
JO - Journal of Financial Economics
JF - Journal of Financial Economics
IS - 3
ER -