TY - JOUR
T1 - Liquidity in auction and specialist market structures
T2 - Evidence from the Italian bourse
AU - Frino, Alex
AU - Gerace, Dionigi
AU - Lepone, Andrew
PY - 2008/12
Y1 - 2008/12
N2 - Several studies find that bid-ask spreads for stocks listed on the NYSE are lower than for stocks listed on NASDAQ. While this suggests that specialist market structures provide greater liquidity than competing dealer markets, the nature of trading on the NYSE, which comprises a specialist competing with limit order flow, obfuscates the comparison. In 2001, a structural change was implemented on the Italian Bourse. Many stocks that traded in an auction market switched to a specialist market, where the specialist controls order flow. Results confirm that liquidity is significantly improved when stocks commence trading in the specialist market. Analysis of the components of the bid-ask spread reveal that the adverse selection component of the spread is significantly reduced. This evidence suggests that specialist market structures provide greater liquidity to market participants.
AB - Several studies find that bid-ask spreads for stocks listed on the NYSE are lower than for stocks listed on NASDAQ. While this suggests that specialist market structures provide greater liquidity than competing dealer markets, the nature of trading on the NYSE, which comprises a specialist competing with limit order flow, obfuscates the comparison. In 2001, a structural change was implemented on the Italian Bourse. Many stocks that traded in an auction market switched to a specialist market, where the specialist controls order flow. Results confirm that liquidity is significantly improved when stocks commence trading in the specialist market. Analysis of the components of the bid-ask spread reveal that the adverse selection component of the spread is significantly reduced. This evidence suggests that specialist market structures provide greater liquidity to market participants.
UR - http://www.scopus.com/inward/record.url?scp=55149117983&partnerID=8YFLogxK
U2 - 10.1016/j.jbankfin.2008.05.010
DO - 10.1016/j.jbankfin.2008.05.010
M3 - Article
AN - SCOPUS:55149117983
SN - 0378-4266
VL - 32
SP - 2581
EP - 2588
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
IS - 12
ER -