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Floor versus Screen Trading: Evidence from the German Stock Market

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  • Erik Theissen

Abstract

We analyze the transaction costs in floor and computerized trading systems. In Germany, floor and screen trading for the same stocks exist in parallel. Bid-ask spreads are not generally lower in one trading system, but the electronic trading system is less attractive for less liquid stocks. This is confirmed by an analysis of the market shares. Spreads in the electronic trading system are more sensitive to changes in return volatility, and the adverse-selection component is larger. We argue that these differences are due to differing degrees of anonymity and discuss implications for the design of electronic trading systems.

Suggested Citation

  • Erik Theissen, 2002. "Floor versus Screen Trading: Evidence from the German Stock Market," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 158(1), pages 1-32, March.
  • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200203)158:1_32:fvstef_2.0.tx_2-l
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    Cited by:

    1. Grammig, Joachim & Schiereck, Dirk & Theissen, Erik, 2001. "Knowing me, knowing you: : Trader anonymity and informed trading in parallel markets," Journal of Financial Markets, Elsevier, vol. 4(4), pages 385-412, October.
    2. Theissen, Erik, 2002. "Price discovery in floor and screen trading systems," Journal of Empirical Finance, Elsevier, vol. 9(4), pages 455-474, November.
    3. Kehr, Carl-Heinrich & Krahnen, Jan P. & Theissen, Erik, 2001. "The Anatomy of a Call Market," Journal of Financial Intermediation, Elsevier, vol. 10(3-4), pages 249-270, July.
    4. Theissen, Erik, 2002. "Price discovery in floor and screen trading systems," Journal of Empirical Finance, Elsevier, vol. 9(4), pages 455-474, November.
    5. Duong, Huu Nhan & Kalev, Petko S., 2013. "Anonymity and order submissions," Pacific-Basin Finance Journal, Elsevier, vol. 25(C), pages 101-118.
    6. repec:eee:ecmode:v:65:y:2017:i:c:p:9-17 is not listed on IDEAS
    7. Bikker, Jacob A. & Spierdijk, Laura & van der Sluis, Pieter Jelle, 2007. "Market impact costs of institutional equity trades," Journal of International Money and Finance, Elsevier, vol. 26(6), pages 974-1000, October.
    8. Daniëls, Tijmen R. & Dönges, Jutta & Heinemann, Frank, 2013. "Crossing network versus dealer market: Unique equilibrium in the allocation of order flow," European Economic Review, Elsevier, vol. 62(C), pages 41-57.
    9. Christiane Goodfellow & Martin T. Bohl, 2011. "Forestalling Floor Closure: Evidence from a Natural Experiment on the German Stock Market," Post-Print hal-00676103, HAL.
    10. Comerton-Forde, Carole & Tang, Kar Mei, 2009. "Anonymity, liquidity and fragmentation," Journal of Financial Markets, Elsevier, vol. 12(3), pages 337-367, August.
    11. FOUCAULT, Thierry & LESCOURRET, Laurence, 2001. "Information sharing, liquidity and transaction costs in floor-based trading systems," Les Cahiers de Recherche 742, HEC Paris.
    12. Pinder, Sean, 2003. "An empirical examination of the impact of market microstructure changes on the determinants of option bid-ask spreads," International Review of Financial Analysis, Elsevier, vol. 12(5), pages 563-577.
    13. Erik Theissen, 2003. "Trader Anonymity, Price Formation and Liquidity," Review of Finance, European Finance Association, vol. 7(1), pages 1-26.

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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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