Yusif Simaan (Fordham University) Daniel G. Weaver (Baruch College) David K. Whitcomb (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. Copyright 2003 by the American Finance Association.
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Thierry Foucault & Sophie Moinas & Erik Theissen, 2004.
"Does Anonymity Matter in Electronic Limit Order Markets?,"
Discussion Papers
3, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
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