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William Christie, P. Schultz (1994)
Why Do NASDAQ Market Makers Avoid Odd-Eighth Quotes?Journal of Finance, 49
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MARKETPLACE ORGANIZATION AND MARKETABILITY: NASDAQ, THE STOCK EXCHANGE, AND THE NATIONAL MARKET SYSTEMJournal of Finance, 33
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- Publisher
- Wiley
- Copyright
- 1994 The American Finance Association
- ISSN
- 0022-1082
- eISSN
- 1540-6261
- DOI
- 10.1111/j.1540-6261.1994.tb04783.x
- Publisher site
- See Article on Publisher Site
Abstract
ABSTRACT On May 26 and 27, 1994 several national newspapers reported the findings of Christie and Schultz (1994) who cannot reject the hypothesis that market makers of active NASDAQ stocks implicitly colluded to maintain spreads of at least $0.25 by avoiding odd‐eighth quotes. On May 27, dealers in Amgen, Cisco Systems, and Microsoft sharply increased their use of odd‐eighth quotes, and mean inside and effective spreads fell nearly 50 percent. This pattern was repeated for Apple Computer the following trading day. Using individual dealer quotes for Apple and Microsoft, we find that virtually all dealers moved in unison to adopt odd‐eighth quotes.
Journal
The Journal of Finance – Wiley
Published: Dec 1, 1994