Institutional trading and alternative trading systems

Jennifer Conrad, Kevin M. Johnson, Sunil Wahal

Research output: Contribution to journalArticle

61 Citations (Scopus)

Abstract

We analyze the use of alternative trading systems in a large sample of institutional orders and the trades that constitute these orders. Proprietary data allow us to distinguish between orders and trades filled by day and after-hours crossing systems, electronic communication networks (ECNs), and traditional brokers. Controlling for variation in order and security characteristics, as well as endogeneity in the choice of trading venue, we find that realized execution costs are generally lower on alternative trading systems. Order handling rules and tick size changes implemented in 1997 appear to have reduced the cost advantage of trading on ECNs.

Original languageEnglish (US)
Pages (from-to)99-134
Number of pages36
JournalJournal of Financial Economics
Volume70
Issue number1
DOIs
StatePublished - Oct 1 2003
Externally publishedYes

Fingerprint

Electronic communication
Trading systems
Institutional trading
Communication networks
Execution costs
Endogeneity
Broker
Tick size
Costs

Keywords

  • Alternative trading systems
  • Crossing systems
  • Electronic communications networks
  • Execution costs
  • Institutional trading

ASJC Scopus subject areas

  • Accounting
  • Strategy and Management
  • Economics and Econometrics
  • Finance

Cite this

Institutional trading and alternative trading systems. / Conrad, Jennifer; Johnson, Kevin M.; Wahal, Sunil.

In: Journal of Financial Economics, Vol. 70, No. 1, 01.10.2003, p. 99-134.

Research output: Contribution to journalArticle

Conrad, Jennifer ; Johnson, Kevin M. ; Wahal, Sunil. / Institutional trading and alternative trading systems. In: Journal of Financial Economics. 2003 ; Vol. 70, No. 1. pp. 99-134.
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