Competition in the market for NASDAQ securities

(with Andriy V. Shkilko, Bonnie F. Van Ness and Robert A. Van Ness)

Selected papers by Michael A. Goldstein are available on SSRN at http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=54604


Journal of Financial Markets




The study investigates competition in the market for NASDAQ stocks during a recent period in US equity markets history when three major Electronic Communication Networks (ECNs)--Archipelago, Island, and Instinet--are identifiable in the Trade and Quote (TAQ) database. We show that the ECNs compete with NASDAQ's SuperMontage on the basis of quotes, execution times, and costs. The three ECNs differ due to uniqueness of their limit order books, cost schedules, and heterogeneity of trading clienteles. Informed traders are shown to prefer venues with sufficient liquidity over those that guarantee anonymity of executions. Despite high levels of segmentation, uneven regulation, and controversial order attraction practices, quote competitiveness is found to increase the probability of executions on all four venues.


Finance and Financial Management | Portfolio and Security Analysis

Recommended Citation

Goldstein, Michael A., Andriy V. Shkilko, Bonnie F. Van Ness, Robert A. Van Ness. 2008. “Competition in the market for NASDAQ securities.” Journal of Financial Markets 11, no. 2: 113-143.

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