English, Article edition: Electronic communication networks, market makers, and the components of the bid-ask spread T. Shawn Strother; James W. Wansley; Phillip Daves

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Bookmark: http://trove.nla.gov.au/version/28494
Physical Description
  • article
Language
  • English

Edition details

Title
  • Electronic communication networks, market makers, and the components of the bid-ask spread
Author
  • T. Shawn Strother
  • James W. Wansley
  • Phillip Daves
Physical Description
  • article
Notes
  • Purpose – The purpose of this paper is to investigate how quotes originating via electronic communication networks (ECN)s affect trading costs. Design/​methodology/​approach – In order to investigate the relations between trading costs and quotation venue, the bid-ask spread is decomposed into its theoretical cost components associated with adverse selection, inventory handling, and order processing. Findings – Stoll's adverse selection costs of ECN-originated quotes relate positively to effective spreads, while Lin et al.'s adverse selection costs relate negatively to effective spreads. Originality/​value – The paper shows how trading costs relate to trading venue choice by decomposing the bid-ask spread.
  • Bid offer spread, Communication technologies, Market system
  • RePEc:eme:ijmfpp:v:5:y:2009:i:1:p:81-109
Language
  • English
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