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Equity Trading Practices and Market Structure: Assessing Asset Managers' Demand for Immediacy

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Author Info
Nicholas Economides
Robert A. Schwartz

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Abstract

This paper summarizes the responses to a questionnaire sent to equity traders through TraderForum of the Institutional Investor. The respondents manage in total a very significant percentage of equity assets under management in the United States. The focus of the questions was the extent of the demand for immediate execution of orders. We found that the majority of traders are willing to trade patiently if this reduces execution costs. Many traders indicate that they frequently delay trades to obtain better prices. Most respondents indicate that they are typically given more than a day to implement a large order, that they typically break up more than 20% of their large orders for execution over time, and that they regularly take more than a day for a large order that has been broken into lots to be executed completely. There is a generally positive view of alternative electronic trading systems, such as Instinet and Investment Technology Group's POSIT. The key motives for trading on these systems are reduced market impact, lower spreads, better liquidity, and anonymity. The respondents indicate that the key changes that would make alternative electronic systems more attractive are an increase in execution rates and more convenient times of trading. The responses to the survey also show that alternative electronic systems would be used more if the traders did not have soft dollar arrangements.

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Publisher Info
Paper provided by New York University, Leonard N. Stern School of Business, Department of Economics in its series Working Papers with number 95-08.

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Date of creation: 1995
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Handle: RePEc:ste:nystbu:95-08

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Postal: New York University, Leonard N. Stern School of Business, Department of Economics, 44 West 4th Street, New York, NY 10012-1126
Phone: (212) 998-0860
Fax: (212) 995-4218
Web page: http://w4.stern.nyu.edu/economics/
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Find related papers by JEL classification:
G1 - Financial Economics - - General Financial Markets
D4 - Microeconomics - - Market Structure and Pricing

References listed on IDEAS
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. Amihud, Yakov & Mendelson, Haim, 1980. "Dealership market : Market-making with inventory," Journal of Financial Economics, Elsevier, vol. 8(1), pages 31-53, March. [Downloadable!] (restricted)
  2. Mildenstein, Eckart & Schleef, Harold J, 1983. " The Optimal Pricing Policy of a Monopolistic Marketmaker in the Equity Market," Journal of Finance, American Finance Association, vol. 38(1), pages 218-31, March. [Downloadable!] (restricted)
  3. Nicholas Economides & Robert A. Schwartz, . "Making the Trade: Equity Trading Practices and Market Structure - 1994," Financial Networks _003, Economics of Networks. [Downloadable!]
  4. Nicholas Economides & Robert Schwartz,, . "Electronic Call Market Trading," Financial Networks _001, Economics of Networks. [Downloadable!]
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  5. McInish, Thomas H. & Wood, Robert A., 1990. "An analysis of transactions data for the Toronto Stock Exchange : Return patterns and end-of-the-day effect," Journal of Banking & Finance, Elsevier, vol. 14(2-3), pages 441-458, August. [Downloadable!] (restricted)
  6. Garman, Mark B., 1976. "Market microstructure," Journal of Financial Economics, Elsevier, vol. 3(3), pages 257-275, June. [Downloadable!] (restricted)
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Cited by:
(explanations, 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. Iftekhar Hasan & Heiko Schmiedel, 2004. "Do networks in the stock exchange industry pay off? European evidence," International Finance 0405002, EconWPA. [Downloadable!]
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  2. Nicholas Economides, 2004. "Competition Policy In Network Industries: An Introduction," Industrial Organization 0407006, EconWPA. [Downloadable!]
    Other versions:
  3. THIESSEN, Eric, 2000. "Trader Anonymity, Price Formation and Liquidity," Les Cahiers de Recherche 701, HEC Paris. [Downloadable!]
  4. Nicholas Economides, 2006. "Public Policy in Network Industries," Working Papers 06-01, NET Institute, revised Sep 2006. [Downloadable!]
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  5. Erik Theissen, 2002. "Trader Anonymity, Price Formation and Liquidity," Bonn Econ Discussion Papers bgse20_2002, University of Bonn, Germany. [Downloadable!]
  6. Nicholas Economides, 1995. "The Economics of Networks," Working Papers 94-24, New York University, Leonard N. Stern School of Business, Department of Economics, revised Sep 1995. [Downloadable!]
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