I examine the effects of Nasdaq's introduction of an anonymous trading facility called SIZE. I compare SIZE to competing ECNs in terms of liquidity and market impact. Despite rapid growth, SIZE has not yet attained a significant market share and rarely influences short-run price evolution. I conclude with discussion of the Nasdaq-ECN mergers and speculate about a role for SIZE in trading listed securities.
BarclayM.J.ChristieW.G.HarrisJ.H.KandelE.SchultzP.H. (1999). The Effects of Market Reform on the Trading Costs and Depths of Nasdaq Stocks. Journal of Finance54, 1–34.
2.
BarclayM.J.HendershottT.McCormickD.T., (2003). Competition Among Trading Venues: Information and Trading on Electronic Communications Networks. Journal of Finance58, 2637–65.
3.
ChristieW.G.SchultzP.H. (1994). Why do NASDAQ Market Makers Avoid Odd-Eighth Quotes?Journal of Finance49, 1813–40.
4.
EngleR.F.RussellJ. (1998). Autoregressive Conditional Duration: A New Model for Irregularly Spaced Transaction Data. Econometrica66, 1127–63.
5.
EngleR.F.PattonA.J. (2004). Impacts of Trades in an Error-Correction Model of Quote Prices. Journal of Financial Markets7, 1–25.
6.
HandaP.SchwartzR.TiwariA. (2000). Not Held Orders: Evidence on the Value of Order Timing in an Equity Market. U. of Iowa Working Paper.
7.
HarrisL.SchultzP. (1998). The Trading Profits of SOES Bandits. Journal of Financial Economics50, 39–62.
8.
HuangR.D. (2002). The Quality of ECN and Nasdaq Market Maker Quotes. Journal of Finance57, 1285–1319.
9.
HasbrouckJ. (1991). Measuring the Information Content of Stock Trades. Journal of Finance46, 179–207.
10.
KlockM.McCormickD.T. (1999). The Impact of Market Maker Competition on Nasdaq Spreads. The Financial Review34, 55–74.
11.
MadhavanA.ChengM. (1997). In Search of Liquidity: Block Trades in the Upstairs and Downstairs Markets. Review of Financial Studies10, 175–204.
12.
MizrachB. (2006). The Next Tick on Nasdaq. Rutgers University Working Paper.
13.
SmithJ.W.SelwayJ.P.McCormickD.T. (1998). The Nasdaq Stock Market: Historical Background and Current Operation. NASD Working Paper 98–01.
14.
WestonJ. (2000). Competition on the Nasdaq and the Impact of Recent Market Reforms. Journal of Finance55, 2565–98.
15.
WestonJ. (2002). Electronic Communication Networks and Liquidity on the Nasdaq. Journal of Financial Services Research22, 125–39.
