Abstract
The differences between ECNs and Nasdaq market makers are used to formulate and test several hypotheses about the choice of trading venue and the importance of ECN trades in the price discovery process. Trades are more likely to occur on ECNs when spreads are narrow and when trading volume and stock-return volatility are high. Medium and large trades on ECNs have lower effective spreads than comparable market-maker trades, although this is not the case for small trades unless they occur on noninteger ticks. ECN trades have greater permanent price impacts than market-maker trades implying that informed trades are more likely to occur on ECNs. Overall, more private information is revealed through ECN trades than through market-maker trades even though more trades occur with market makers.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.