A Comparison of Transaction Costs between Competitive Market Maker and Specialist Market Structures
This study compares bid-ask spreads for equity options in two market structures: the American Stock Exchange specialist structure and the Chicago Board Options Exchange competitive market maker structure. When trading volume is low, the specialist structure is associated with significantly smaller spreads. As volume rises, this difference appears to diminish. These results are consistent with those of S. Grossman and M. Miller (1988). Copyright 1992 by University of Chicago Press.