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Market Fragmentation, Market Quality and Clientele Effects

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  • D. Alasdair S. Turnbull

Abstract

This paper analyzes the relative trading activity of securities cross-listed on two highly integrated international stock exchanges. We find that traders choose an exchange on the basis of superior market quality, as measured by better quoted prices, greater depth at the market in its limit order book and better price continuity. As well, clientele effects influence trade location. From the perspective of a US investor, the price impacts of the total sample of trades for these securities, are statistically significantly lower on the New York Stock Exchange than on the Toronto Stock Exchange; but are not economically different. The results are consistent with the order splitting hypothesis and the co-existence of multiple markets.

Suggested Citation

  • D. Alasdair S. Turnbull, 2018. "Market Fragmentation, Market Quality and Clientele Effects," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 9(1), pages 74-89, January.
    • Handle: RePEc:jfr:ijfr11:v:9:y:2018:i:1:p:74-89
    DOI: 10.5430/ijfr.v9n1p74
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    References listed on IDEAS

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    3. Marco Pagano, 1989. "Trading Volume and Asset Liquidity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(2), pages 255-274.
    4. Chowdhry, Bhagwan & Nanda, Vikram, 1991. "Multimarket Trading and Market Liquidity," The Review of Financial Studies, Society for Financial Studies, vol. 4(3), pages 483-511.
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