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Making the Trade: Equity Trading Practices and Market Structure - 1994

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  • Nicholas Economides

    () (New York University, NY 10012-1126., Stern School of Business)

  • Robert A. Schwartz

Abstract

This report summarizes the responses to a questionnaire sent to equity traders through TraderForum of the Institutional Investor. The respondents manage in total a very significant percentage of equity assets under management in the United States. The focus of the questions was the extent of the demand for immediate execution of orders. We found that the majority of traders are willing to trade patiently if this reduces execution costs. Many traders indicate that they frequently delay trades to obtain better prices. Most respondents indicate that they are typically given more than a day to implement a large order, that they typically break up more than 20% of their large orders for execution over time, and that they regularly take more than a day for a large order that has been broken into lots to be executed completely. There is a generally positive view of alternative electronic trading systems, such as Instinet and Investment Technology Group's POSIT. The key motives for trading on these systems are reduced market impact, lower spreads, better liquidity, and anonymity. The respondents indicate that the key changes that would make alternative electronic systems more attractive are an increase in execution rates and more convenient times of trading. The responses to the survey also show that alternative electronic systems would be used more if the traders did not have soft dollar arrangements.

Suggested Citation

  • Nicholas Economides & Robert A. Schwartz, "undated". "Making the Trade: Equity Trading Practices and Market Structure - 1994," Financial Networks _003, Economics of Networks.
  • Handle: RePEc:wop:ennefn:_003
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    File URL: http://raven.stern.nyu.edu/networks/making.zip
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    Cited by:

    1. Nicholas Economides & Robert Schwartz,, "undated". "Electronic Call Market Trading," Financial Networks _001, Economics of Networks.
    2. Nicholas Economides & Robert A. Schwartz,, "undated". "Equity Trading Practices and Market Structure: Assessing Asset Managers' Demand for Immediacy," Financial Networks 9508, Economics of Networks.
    3. Nicholas Economides & Jeff Heisler, "undated". "Equilibrium Fee Schedules in a Monopolist Call Market," Financial Networks 94-15, Stern School of Bu, Economics of Networks.
    4. Marco Pagano, 1998. "The Changing Microstructure of European Equity Markets," CSEF Working Papers 04, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.

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