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The Highest Price Ever: The Great NYSE Seat Sale of 1928 1929 and Capacity Constraints

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Author Info
Davis, Lance E.
Neal, Larry
White, Eugene

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Abstract

During the 1920s the New York Stock Exchange s position as the dominant American exchange was eroding. Costs to customers, measured as bid-ask spreads, spiked when surging inflows of orders collided with the constraint created by a fixed number of brokers. The NYSE s management proposed and the membership approved a 25 percent increase in the number of seats by issuing a quarter-seat dividend to all members. An event study reveals that the aggregate value of the NYSE rose in anticipation of improved competitiveness. These expectations were justified as bid-ask spreads became less sensitive to peak volume days.

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Article provided by Cambridge University Press in its journal The Journal of Economic History.

Volume (Year): 67 (2007)
Issue (Month): 03 (September)
Pages: 705-739
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Handle: RePEc:cup:jechis:v:67:y:2007:i:03:p:705-739_00

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Schwert, G. William, 1977. "Stock exchange seats as capital assets," Journal of Financial Economics, Elsevier, vol. 4(1), pages 51-78, January. [Downloadable!] (restricted)
  2. G. William Schwert, 1977. "Public Regulation of National Securities Exchanges: A Test of the Capture Hypothesis," Bell Journal of Economics, The RAND Corporation, vol. 8(1), pages 128-150, Spring. [Downloadable!] (restricted)
  3. Madhavan, Ananth, 2000. "Market microstructure: A survey," Journal of Financial Markets, Elsevier, vol. 3(3), pages 205-258, August. [Downloadable!] (restricted)
  4. Stoll, Hans R, 1978. "The Supply of Dealer Services in Securities Markets," Journal of Finance, American Finance Association, vol. 33(4), pages 1133-51, September. [Downloadable!] (restricted)
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  5. Golbe, Devra L., 1986. "Has deregulation decreased the risk of NYSE seat ownership?," Economics Letters, Elsevier, vol. 20(3), pages 283-289. [Downloadable!] (restricted)
  6. Jarrell, Gregg A, 1984. "Change at the Exchange: The Causes and Effects of Deregulation," Journal of Law & Economics, University of Chicago Press, vol. 27(2), pages 273-312, October.
  7. Donald B. Keim & Ananth Madhavan, 2000. "The Relation between Stock Market Movements and NYSE Seat Prices," Journal of Finance, American Finance Association, vol. 55(6), pages 2817-2840, December. [Downloadable!] (restricted)
  8. Donald B. Keim & Ananth Madhavan, . "The Information Contained in Stock Exchange Seat Prices," Rodney L. White Center for Financial Research Working Papers 7-98, Wharton School Rodney L. White Center for Financial Research. [Downloadable!]
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  9. Easley, David & O'Hara, Maureen, 1987. "Price, trade size, and information in securities markets," Journal of Financial Economics, Elsevier, vol. 19(1), pages 69-90, September. [Downloadable!] (restricted)
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