TY - JOUR
T1 - Decimalization and competition among stock markets
T2 - Evidence from the Toronto Stock Exchange cross-listed securities
AU - Ahn, Hee Joon
AU - Cao, Charles Q.
AU - Choe, Hyuk
PY - 1998/4/30
Y1 - 1998/4/30
N2 - We study the impact of Toronto Stock Exchange (TSE) decimalization on the competition for order flow. For TSE stocks cross-listed on the NYSE/AMEX, spreads decrease by 27% on the TSE and do not change on the NYSE/AMEX. For TSE stocks cross-listed on Nasdaq, spreads decline by 16% and 8% on the TSE and Nasdaq, respectively. However, order flow does not migrate from U.S. markets to the TSE. Our results indicate that the savings in TSE transaction costs do not offset the benefits of trading on the NYSE/AMEX, and that Nasdaq dealers might not operate as efficiently as perfect competition warrants.
AB - We study the impact of Toronto Stock Exchange (TSE) decimalization on the competition for order flow. For TSE stocks cross-listed on the NYSE/AMEX, spreads decrease by 27% on the TSE and do not change on the NYSE/AMEX. For TSE stocks cross-listed on Nasdaq, spreads decline by 16% and 8% on the TSE and Nasdaq, respectively. However, order flow does not migrate from U.S. markets to the TSE. Our results indicate that the savings in TSE transaction costs do not offset the benefits of trading on the NYSE/AMEX, and that Nasdaq dealers might not operate as efficiently as perfect competition warrants.
UR - http://www.scopus.com/inward/record.url?scp=0003375783&partnerID=8YFLogxK
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U2 - 10.1016/S1386-4181(97)00002-5
DO - 10.1016/S1386-4181(97)00002-5
M3 - Article
AN - SCOPUS:0003375783
SN - 1386-4181
VL - 1
SP - 51
EP - 87
JO - Journal of Financial Markets
JF - Journal of Financial Markets
IS - 1
ER -