Advanced Search
MyIDEAS: Login to save this article or follow this journal

Order Preferencing and Market Quality on U.S. Equity Exchanges

Contents:

Author Info

  • Mark A. Peterson
  • Erik R. Sirri
Registered author(s):

    Abstract

    We present a detailed view of market quality in the presence of preferencing arrangements. A unique dataset provides the opportunity to measure trading costs of marketable orders and fill rates and ex post costs of limit orders across trading venues. For market orders, we find the primary exchange provides the lowest execution costs. However, the preferencing exchanges are no worse than, and in most cases better than, the nonpreferencing regional exchanges. For limit orders, the regionals execute limit orders more frequently than the primary market and with an ex post execution cost that is not very different from the primary market. Copyright 2003, Oxford University Press.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://hdl.handle.net/10.1093/rfs/hhg009
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Society for Financial Studies in its journal The Review of Financial Studies.

    Volume (Year): 16 (2003)
    Issue (Month): 2 ()
    Pages: 385-415

    as in new window
    Handle: RePEc:oup:rfinst:v:16:y:2003:i:2:p:385-415

    Contact details of provider:
    Postal: Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.
    Fax: 919-677-1714
    Email:
    Web page: http://www.rfs.oupjournals.org/
    More information through EDIRC

    Order Information:
    Web: http://www4.oup.co.uk/revfin/subinfo/

    Related research

    Keywords:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Cecilia Caglio & Stewart Mayhew, 2012. "Equity trading and the allocation of market data revenue," Finance and Economics Discussion Series 2012-65, Board of Governors of the Federal Reserve System (U.S.).
    2. Michael R. King & Carol Osler & Dagfinn Rime, 2013. "The market microstructure approach to foreign exchange - Looking back and looking forward," Working Paper 2013/12, Norges Bank.
    3. Kee Chung & Chairat Chuwonganant & D. McCormick, 2006. "Order preferencing, adverse-selection costs, and the probability of information-based trading," Review of Quantitative Finance and Accounting, Springer, vol. 27(4), pages 343-364, December.
    4. Osler, Carol & Mende, Alexander & Menkhoff, Lukas, 2006. "Price Discovery in Currency Markets," Hannover Economic Papers (HEP) dp-351, Leibniz Universit├Ąt Hannover, Wirtschaftswissenschaftliche Fakult├Ąt.
    5. Chung, Kee H. & Chuwonganant, Chairat & McCormick, D. Timothy, 2004. "Order preferencing and market quality on NASDAQ before and after decimalization," Journal of Financial Economics, Elsevier, vol. 71(3), pages 581-612, March.
    6. Elisabeth Paulet, 2009. "The Subprime Crisis and the European Banking Sector: the Renewal of Universal Banks?," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 11(Number Sp), pages 684-697, November.
    7. Chung, Kee H. & Chuwonganant, Chairat & McCormick, D. Timothy, 2006. "Does internalization diminish the impact of quote aggressiveness on dealer market share?," Journal of Financial Intermediation, Elsevier, vol. 15(1), pages 108-131, January.
    8. He, Chen & Odders-White, Elizabeth & Ready, Mark J., 2006. "The impact of preferencing on execution quality," Journal of Financial Markets, Elsevier, vol. 9(3), pages 246-273, August.
    9. Reitz, Stefan & Schmidt, Markus A. & Taylor, Mark P., 2009. "Financial intermediation and the role of price discrimination in a two-tier market," Discussion Paper Series 1: Economic Studies 2009,13, Deutsche Bundesbank, Research Centre.
    10. Chung, Kee H. & Chuwonganant, Chairat, 2007. "Quote-based competition, market share, and execution quality in NASDAQ-listed securities," Journal of Banking & Finance, Elsevier, vol. 31(9), pages 2770-2795, September.
    11. Garvey, Ryan & Wu, Fei, 2009. "Intraday time and order execution quality dimensions," Journal of Financial Markets, Elsevier, vol. 12(2), pages 203-228, May.
    12. Lescourret, Laurence & Robert, Christian Y., 2011. "Transparency matters: Price formation in the presence of order preferencing," Journal of Financial Markets, Elsevier, vol. 14(2), pages 227-258, May.
    13. Michael Goldstein & Andriy Shkilko & Bonnie Ness & Robert Ness, 2010. "Inter-market competition for NYSE-listed securities under decimals," Review of Quantitative Finance and Accounting, Springer, vol. 35(4), pages 371-391, November.
    14. Garvey, Ryan & Wu, Fei, 2011. "Information, speed vs. cost trade-offs, and order routing decisions in U.S. equity markets," Journal of Empirical Finance, Elsevier, vol. 18(3), pages 408-422, June.
    15. Garvey, Ryan & Wu, Fei, 2010. "Speed, distance, and electronic trading: New evidence on why location matters," Journal of Financial Markets, Elsevier, vol. 13(4), pages 367-396, November.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:oup:rfinst:v:16:y:2003:i:2:p:385-415. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.