Order Execution and Price Discovery During the 2008 Financial Crisis

Abstract

We examine 46 cross-listings characterized by varying degrees of order execution from Canada, Brazil, and Mexico onto the NYSE during 2008. We develop a measure of order execution advantage (OEA) and find that OEA and price discovery migrate towards the home market during the financial crisis in the latter part of 2008, and notably more for firms subjected to the short selling ban imposed by the SEC. We show the NYSE’s percent adjustment to exchange rates and differences in price impacts are key variables that capture cross-sectional variation in the NYSE’s share in price discovery.