Equity trading and the allocation of market data revenue
Revenues generated from the sales of consolidated data represent a substantial source of income for U.S. stock exchanges. Until 2007, consolidated data revenue was allocated in proportion to the number of reported trades. This allocation rule encouraged market participants to break up large trades and execute them in multiple pieces. Exchanges devised revenue-sharing and rebate programs that rewarded order-flow providers, and encouraged algorithmic traders to execute strategies involving large numbers of small trades. We provide evidence that data revenue allocation influenced the trading process, by examining trading activity surrounding various events that changed the marginal data revenue per trade.
|Date of creation:||2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.federalreserve.gov/
More information through EDIRC
|Order Information:||Web: http://www.federalreserve.gov/pubs/feds/fedsorder.html|
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.:
- Thierry Foucault & Ohad Kadan & Eugene Kandel, 2013.
"Liquidity Cycles and Make/Take Fees in Electronic Markets,"
Journal of Finance,
American Finance Association, vol. 68(1), pages 299-341, 02.
- Foucault, Thierry & Kadan, Ohad & Kandel, Eugene, 2009. "Liquidity cycles and make/take fees in electronic markets," Les Cahiers de Recherche 920, HEC Paris.
- Foucault, Thierry & Kadan, Ohad & Kandel, Eugene, 2009. "Liquidity cycles and make/take fees in electronic markets," CEPR Discussion Papers 7551, C.E.P.R. Discussion Papers.
- Tano Santos & Joséa. Scheinkman, 2001.
"Competition Among Exchanges,"
The Quarterly Journal of Economics,
MIT Press, vol. 116(3), pages 1027-1061, August.
- Tano Santos & José A. Scheinkman, 2000. "Competition Among Exchanges," CRSP working papers 514, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- T. Santos & J. Scheinkman, 2000. "Competition Among Exchanges," Princeton Economic Theory Papers 00s12, Economics Department, Princeton University.
- Seppi, Duane J, 1990. " Equilibrium Block Trading and Asymmetric Information," Journal of Finance, American Finance Association, vol. 45(1), pages 73-94, March.
- Kerry Back & Shmuel Baruch, 2007. "Working Orders in Limit Order Markets and Floor Exchanges," Journal of Finance, American Finance Association, vol. 62(4), pages 1589-1621, 08.
- Mark A. Peterson & Erik R. Sirri, 2003. "Order Preferencing and Market Quality on U.S. Equity Exchanges," Review of Financial Studies, Society for Financial Studies, vol. 16(2), pages 385-415.
- Bessembinder, Hendrik, 2003. "Quote-based competition and trade execution costs in NYSE-listed stocks," Journal of Financial Economics, Elsevier, vol. 70(3), pages 385-422, December.
- Thierry Foucault & Christine a Parlour, .
"Competition for Listings,"
GSIA Working Papers
2000-E11, Carnegie Mellon University, Tepper School of Business.
- Sugato Chakravarty, 2002.
"Stealth-Trading: Which Traders' Trades Move Stock Prices?,"
- Chakravarty, Sugato, 2001. "Stealth-trading: Which traders' trades move stock prices?," Journal of Financial Economics, Elsevier, vol. 61(2), pages 289-307, August.
- Cecilia Caglio & Andrea Pescatori, 2013. "Competition among Exchanges and Enforcement Policy," IMF Working Papers 13/37, International Monetary Fund.
- Barclay, Michael J. & Warner, Jerold B., 1993. "Stealth trading and volatility : Which trades move prices?," Journal of Financial Economics, Elsevier, vol. 34(3), pages 281-305, December.
- Bloomfield, Robert & O'Hara, Maureen, 1998. "Does order preferencing matter?," Journal of Financial Economics, Elsevier, vol. 50(1), pages 3-37, October.
When requesting a correction, please mention this item's handle: RePEc:fip:fedgfe:2012-65. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kris Vajs)
If references are entirely missing, you can add them using this form.