THE PRICING OF SECURITY DEALER SERVICES: AN EMPIRICAL STUDY OF NASDAQ STOCKS

THE PRICING OF SECURITY DEALER SERVICES: AN EMPIRICAL STUDY OF NASDAQ STOCKS INTRODUCTION AN IMPORTANT, if not critical, element in almost every financial market is the dealer who stands ready to trade for his own account and thereby provides to the public the convenience of being able to trade immediately. The dealer incurs costs of holding an inventory of securities, certain costs of handling each order and costs due to adverse information possessed by those that trade with him. He is compensated for the costs by selling at the ask price (above the "true" price) and buying at the bid price (below the "true" price).I Dealers are to be distinguished from brokers who do not bear risk and who usually charge a commission. Since healthy financial markets are viewed as critical to a healthy economy and since dealers stand at the center of many financial markets, dealers have been the focus of many regulatory inquiries and some empirical studies by academicians. Today, competitive forces (instiutional trading, third market, block trading), Justice Department pressures, and technological change (the computer) are in the process of producing major changes in the structure of securities markets. As part of this restructuring a major issue is the way in which the dealer function should be http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

THE PRICING OF SECURITY DEALER SERVICES: AN EMPIRICAL STUDY OF NASDAQ STOCKS

The Journal of Finance, Volume 33 (4) – Sep 1, 1978

Loading next page...
 
/lp/wiley/the-pricing-of-security-dealer-services-an-empirical-study-of-nasdaq-uNQNN7dd9o
Publisher
Wiley
Copyright
1978 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
DOI
10.1111/j.1540-6261.1978.tb02054.x
Publisher site
See Article on Publisher Site

Abstract

INTRODUCTION AN IMPORTANT, if not critical, element in almost every financial market is the dealer who stands ready to trade for his own account and thereby provides to the public the convenience of being able to trade immediately. The dealer incurs costs of holding an inventory of securities, certain costs of handling each order and costs due to adverse information possessed by those that trade with him. He is compensated for the costs by selling at the ask price (above the "true" price) and buying at the bid price (below the "true" price).I Dealers are to be distinguished from brokers who do not bear risk and who usually charge a commission. Since healthy financial markets are viewed as critical to a healthy economy and since dealers stand at the center of many financial markets, dealers have been the focus of many regulatory inquiries and some empirical studies by academicians. Today, competitive forces (instiutional trading, third market, block trading), Justice Department pressures, and technological change (the computer) are in the process of producing major changes in the structure of securities markets. As part of this restructuring a major issue is the way in which the dealer function should be

Journal

The Journal of FinanceWiley

Published: Sep 1, 1978

References

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create folders to
organize your research

Export folders, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off