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Does SIZE Matter? Liquidity Provision by the Nasdaq Anonymous Trading Facility

  • Bruce Mizrach

    ()

    (Rutgers University)

I examine the effects of Nasdaq's introduction of an anonymous trading facility called SIZE. I compare SIZE to competing ECNs in terms of liquidity and market impact. Despite rapid growth, SIZE has not yet attained a significant market share and rarely influences short-run price evolution. I conclude with discussion of the Nasdaq-ECN mergers and speculate about a role for SIZE in trading listed securities.

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File URL: ftp://snde.rutgers.edu/Rutgers/wp/2006-02.pdf
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Paper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number 200602.

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Length: 20 pages
Date of creation: 09 Jan 2006
Date of revision:
Publication status: Published in Competition and Regulation in Network Industries 1, 2006, 471-85.
Handle: RePEc:rut:rutres:200602
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  1. Hasbrouck, Joel, 1991. " Measuring the Information Content of Stock Trades," Journal of Finance, American Finance Association, vol. 46(1), pages 179-207, March.
  2. Roger D. Huang, 2002. "The Quality of ECN and Nasdaq Market Maker Quotes," Journal of Finance, American Finance Association, vol. 57(3), pages 1285-1319, 06.
  3. Michael J. Barclay & Terrence Hendershott & D. Timothy McCormick, 2003. "Competition among Trading Venues: Information and Trading on Electronic Communications Networks," Journal of Finance, American Finance Association, vol. 58(6), pages 2637-2666, December.
  4. James P. Weston, 2000. "Competition on the Nasdaq and the Impact of Recent Market Reforms," Journal of Finance, American Finance Association, vol. 55(6), pages 2565-2598, December.
  5. James Weston, 2002. "Electronic Communication Networks and Liquidity on the Nasdaq," Journal of Financial Services Research, Springer, vol. 22(1), pages 125-139, August.
  6. Robert F. Engle & Jeffrey R. Russell, 1998. "Autoregressive Conditional Duration: A New Model for Irregularly Spaced Transaction Data," Econometrica, Econometric Society, vol. 66(5), pages 1127-1162, September.
  7. 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 1813-40, December.
  8. Engle, Robert F. & Patton, Andrew J., 2004. "Impacts of trades in an error-correction model of quote prices," Journal of Financial Markets, Elsevier, vol. 7(1), pages 1-25, January.
  9. 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.
  10. Michael J. Barclay & William G. Christie & Jeffrey H. Harris & Eugene Kandel & Paul H. Schultz, 1999. "Effects of Market Reform on the Trading Costs and Depths of Nasdaq Stocks," Journal of Finance, American Finance Association, vol. 54(1), pages 1-34, 02.
  11. Klock, Mark & McCormick, D Timothy, 1999. "The Impact of Market Maker Competition on Nasdaq Spreads," The Financial Review, Eastern Finance Association, vol. 34(4), pages 55-73, November.
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