Publication Type

Journal Article

Version

acceptedVersion

Publication Date

9-2003

Abstract

On July 31, 2001, for the first time in its history, the New York Stock Exchange (NYSE) began trading three unlisted securities. The DIA, SPY, and QQQ are the most actively traded Exchange Traded Funds (ETFs) and are listed on the American Stock Exchange. On April 15, 2002 another 27 ETFs followed. These two events provide a unique experiment for studying the impact of a new entrant on market quality. In contrast to recently revived concerns about the adverse impact of market fragmentation, we document that the NYSE entry leads to a dramatic improvement in liquidity that we attribute to the elimination of market-maker rents.

Keywords

Securities trading, Market liquidity, Trading cost, ETF, Exchange competition

Discipline

Finance and Financial Management | Portfolio and Security Analysis

Research Areas

Finance

Publication

Journal of Banking and Finance

Volume

27

Issue

9

First Page

1667

Last Page

1703

ISSN

0378-4266

Identifier

10.1016/S0378-4266(03)00095-5

Publisher

Elsevier

Copyright Owner and License

Authors

Comments

Special issue on The Future of Stock Exchanges in a Globalizing World.

Additional URL

https://doi.org/10.1016/S0378-4266(03)00095-5

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