Policy Watch: Did Nasdaq Market Makers Implicitly Collude?
This paper chronicles the research that led to the conclusion that Nasdaq marketmakers implicitly colluded to maintain supracompetitive spreads (Christie and Schultz, 1994). The paper provides a brief description of the differences between a dealer and an auction market, and highlights the result that NASDAQ marketmakers quoted a majority of large issues exclusively in even-eighths. The paper then provides a personalized description of the events that soon followed, including the publicity surrounding the article, the ensuing antitrust investigation by the Department of Justice, and the abandonment of these agreements once the practice was disclosed.
Volume (Year): 9 (1995)
Issue (Month): 3 (Summer)
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- Christie, William G & Harris, Jeffrey H & Schultz, Paul H, 1994. " Why Did NASDAQ Market Makers Stop Avoiding Odd-Eighth Quotes?," Journal of Finance, American Finance Association, vol. 49(5), pages 1841-1860, December.
- Christie William G. & Huang Roger D., 1994. "Market Structures and Liquidity: A Transactions Data Study of Exchange Listings," Journal of Financial Intermediation, Elsevier, vol. 3(3), pages 300-326, June.
- Christie, William G & Schultz, Paul H, 1994. " Why Do NASDAQ Market Makers Avoid Odd-Eighth Quotes?," Journal of Finance, American Finance Association, vol. 49(5), pages 1813-1840, December.
- Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, January.
- Neal, Robert, 1992. "A Comparison of Transaction Costs between Competitive Market Maker and Specialist Market Structures," The Journal of Business, University of Chicago Press, vol. 65(3), pages 317-334, July.
- Brock, William A. & Kleidon, Allan W., 1992. "Periodic market closure and trading volume : A model of intraday bids and asks," Journal of Economic Dynamics and Control, Elsevier, vol. 16(3-4), pages 451-489.
- Chan, K C & Christie, William G & Schultz, Paul H, 1995. "Market Structure and the Intraday Pattern of Bid-Ask Spreads for NASDAQ Securities," The Journal of Business, University of Chicago Press, vol. 68(1), pages 35-60, January.