Trading Venue Choice in the Post-2000 Era: An Analysis of Firms that Switch between NYSE, Amex, and Nasdaq

Abstract

This paper investigates the relation between listing exchange and stock characteristics in the post-2000 era. Previous studies document that firms experience significant changes in trading costs, trading activities, price volatility, positive abnormal returns, and investor recognition when firms switch their stock listing from one exchange to another. Our paper shows that the changes in transaction costs, particularly for Nasdaq-to-NYSE firms, become much smaller than those documented in previous studies and disappear after the implement of Regulation NMS. We also find that trading costs, price volatility, and trading volume are, in fact, affected by market mechanism (i.e., dealer versus auction markets) and that the price reaction at the switching announcement and/or implementation date depends on the type of the firm (technology versus non-technology firms). Overall, our results suggest that the increased competition among stock exchanges after 2000 lowers the benefits of switching listing exchange but some benefits (i.e., trading volume and return volatility) remain, likely due to differences in market structures.