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French and U.S. trading of cross-listed stocks around the period of U.S. decimalization: Volume, spreads, and depth effects


  • Lin, Bing-Xuan
  • Michayluk, David
  • Oppenheimer, Henry R.
  • Sabherwal, Sanjiv


We analyze how U.S. decimalization affects stocks cross-listed in France (Euronext) and the U.S. (NYSE). The French stocks examined are much larger than the non-U.S. stocks examined in prior studies of decimalization, and their U.S. trading is likely to be dominated by institutions. So, we explore whether a reduction in depths in the U.S. due to decimalization makes the U.S. market less competitive for institutions trading these French stocks. We find evidence consistent with the above. First, the average NYSE trade size for these stocks relative to that on Euronext declines substantially after decimalization. Second, we categorize individual trades by the number of shares traded. We find that mainly driven by large trades, the NYSE proportion of trading of French firms declines markedly after decimalization. Third, using regression analysis, we find that the decline in the U.S. share of institutional trading volume is significantly positively related with the decline in NYSE depths relative to Euronext, and the decline is greater for French firms. Overall, we find consistent results indicating a migration of institutional order flow in French firms to France after NYSE decimalization. Also, intraday analysis indicates that the institutional volume in both France and the U.S. is greatest when both the markets are open.

Suggested Citation

  • Lin, Bing-Xuan & Michayluk, David & Oppenheimer, Henry R. & Sabherwal, Sanjiv, 2009. "French and U.S. trading of cross-listed stocks around the period of U.S. decimalization: Volume, spreads, and depth effects," International Review of Financial Analysis, Elsevier, vol. 18(5), pages 223-231, December.
  • Handle: RePEc:eee:finana:v:18:y:2009:i:5:p:223-231

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    References listed on IDEAS

    1. Wood, Robert A & McInish, Thomas H & Ord, J Keith, 1985. "An Investigation of Transactions Data for NYSE Stocks," Journal of Finance, American Finance Association, vol. 40(3), pages 723-739, July.
    2. Oppenheimer, Henry R. & Sabherwal, Sanjiv, 2003. "The competitive effects of US decimalization: Evidence from the US-listed Canadian stocks," Journal of Banking & Finance, Elsevier, vol. 27(9), pages 1883-1910, September.
    3. McInish, Thomas H & Wood, Robert A, 1992. "An Analysis of Intraday Patterns in Bid/Ask Spreads for NYSE Stocks," Journal of Finance, American Finance Association, vol. 47(2), pages 753-764, June.
    4. Goldstein, Michael A. & A. Kavajecz, Kenneth, 2000. "Eighths, sixteenths, and market depth: changes in tick size and liquidity provision on the NYSE," Journal of Financial Economics, Elsevier, vol. 56(1), pages 125-149, April.
    5. Ahn, Hee-Joon & Cao, Charles Q. & Choe, Hyuk, 1998. "Decimalization and competition among stock markets: Evidence from the Toronto Stock Exchange cross-listed securities," Journal of Financial Markets, Elsevier, vol. 1(1), pages 51-87, April.
    6. Madhavan, Ananth & Cheng, Minder, 1997. "In Search of Liquidity: Block Trades in the Upstairs and Downstairs Markets," Review of Financial Studies, Society for Financial Studies, vol. 10(1), pages 175-203.
    7. Jones, Charles M. & Lipson, Marc L., 2001. "Sixteenths: direct evidence on institutional execution costs," Journal of Financial Economics, Elsevier, vol. 59(2), pages 253-278, February.
    8. Ahn, Hee-Joon & Cao, Charles Q. & Choe, Hyuk, 1996. "Tick Size, Spread, and Volume," Journal of Financial Intermediation, Elsevier, vol. 5(1), pages 2-22, January.
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    Cited by:

    1. Thanos Verousis & Pietro Perotti & Georgios Sermpinis, 2018. "One size fits all? High frequency trading, tick size changes and the implications for exchanges: market quality and market structure considerations," Review of Quantitative Finance and Accounting, Springer, vol. 50(2), pages 353-392, February.
    2. Xiao, Xijuan & Yamamoto, Ryuichi, 2020. "Price discovery, order submission, and tick size during preopen period," Pacific-Basin Finance Journal, Elsevier, vol. 63(C).


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