Nasdaq market structure and spread patterns
Publication
, Journal Article
Kandel, E; Marx, LM
Published in: Journal of Financial Economics
January 1, 1997
Because of its institutional features, the Nasdaq market does not fit the standard competitive model. We construct a model that reflects the distinguishing characteristics of the Nasdaq market. This model implies that in dealer markets with a minimum price increment, competition among market-makers does not necessarily drive spreads down to the level of marginal cost. Using this result, we provide an explanation for the odd-eighth avoidance documented in Christie and Schultz (1994). We show that market-makers can use odd-tick avoidance as a coordination device to increase spreads. Evidence from Nasdaq supports our hypotheses.
Duke Scholars
Published In
Journal of Financial Economics
DOI
ISSN
0304-405X
Publication Date
January 1, 1997
Volume
45
Issue
1
Start / End Page
61 / 89
Related Subject Headings
- Finance
- 1606 Political Science
- 1502 Banking, Finance and Investment
- 1402 Applied Economics
Citation
APA
Chicago
ICMJE
MLA
NLM
Kandel, E., & Marx, L. M. (1997). Nasdaq market structure and spread patterns. Journal of Financial Economics, 45(1), 61–89. https://doi.org/10.1016/S0304-405X(96)00894-X
Kandel, E., and L. M. Marx. “Nasdaq market structure and spread patterns.” Journal of Financial Economics 45, no. 1 (January 1, 1997): 61–89. https://doi.org/10.1016/S0304-405X(96)00894-X.
Kandel E, Marx LM. Nasdaq market structure and spread patterns. Journal of Financial Economics. 1997 Jan 1;45(1):61–89.
Kandel, E., and L. M. Marx. “Nasdaq market structure and spread patterns.” Journal of Financial Economics, vol. 45, no. 1, Jan. 1997, pp. 61–89. Scopus, doi:10.1016/S0304-405X(96)00894-X.
Kandel E, Marx LM. Nasdaq market structure and spread patterns. Journal of Financial Economics. 1997 Jan 1;45(1):61–89.
Published In
Journal of Financial Economics
DOI
ISSN
0304-405X
Publication Date
January 1, 1997
Volume
45
Issue
1
Start / End Page
61 / 89
Related Subject Headings
- Finance
- 1606 Political Science
- 1502 Banking, Finance and Investment
- 1402 Applied Economics