Access

You are not currently logged in.

Access your personal account or get JSTOR access through your library or other institution:

login

Log in to your personal account or through your institution.

If you need an accessible version of this item please contact JSTOR User Support

Why do NASDAQ Market Makers Avoid Odd-Eighth Quotes?

William G. Christie and Paul H. Schultz
The Journal of Finance
Vol. 49, No. 5 (Dec., 1994), pp. 1813-1840
Published by: Wiley for the American Finance Association
DOI: 10.2307/2329272
Stable URL: http://www.jstor.org/stable/2329272
Page Count: 28
  • Get Access
  • Read Online (Free)
  • Download ($33.95)
  • Cite this Item
If you need an accessible version of this item please contact JSTOR User Support
Why do NASDAQ Market Makers Avoid Odd-Eighth Quotes?
Preview not available

Abstract

The NASDAQ multiple dealer market is designed to produce narrow bid-ask spreads through the competition for order flow among individual dealers. However, we find that odd-eighth quotes are virtually nonexistent for 70 of 100 actively traded NASDAQ securities, including Apple Computer and Lotus Development. The lack of odd-eighth quotes cannot be explained by the negotiation hypothesis of Harris (1991), trading activity, or other variables thought to impact spreads. This result implies that the inside spread for a large number of NASDAQ stocks is at least $0.25 and raises the question of whether NASDAQ dealers implicitly collude to maintain wide spreads.

Page Thumbnails

  • Thumbnail: Page 
1813
    1813
  • Thumbnail: Page 
1814
    1814
  • Thumbnail: Page 
1815
    1815
  • Thumbnail: Page 
1816
    1816
  • Thumbnail: Page 
1817
    1817
  • Thumbnail: Page 
1818
    1818
  • Thumbnail: Page 
1819
    1819
  • Thumbnail: Page 
1820
    1820
  • Thumbnail: Page 
1821
    1821
  • Thumbnail: Page 
1822
    1822
  • Thumbnail: Page 
1823
    1823
  • Thumbnail: Page 
1824
    1824
  • Thumbnail: Page 
1825
    1825
  • Thumbnail: Page 
1826
    1826
  • Thumbnail: Page 
1827
    1827
  • Thumbnail: Page 
1828
    1828
  • Thumbnail: Page 
1829
    1829
  • Thumbnail: Page 
1830
    1830
  • Thumbnail: Page 
1831
    1831
  • Thumbnail: Page 
1832
    1832
  • Thumbnail: Page 
1833
    1833
  • Thumbnail: Page 
1834
    1834
  • Thumbnail: Page 
1835
    1835
  • Thumbnail: Page 
1836
    1836
  • Thumbnail: Page 
1837
    1837
  • Thumbnail: Page 
1838
    1838
  • Thumbnail: Page 
1839
    1839
  • Thumbnail: Page 
1840
    1840