Suchergebnisse

AbstractUsing a carefully constructed matched sample of control (nondecimal) stocks, we isolate the effects of decimalization for a sample of NYSE‐listed common stocks trading in decimals. We find that the quoted depth as well as the quoted and effective bid‐ask spreads declined significantly following decimalization. Additionally, both the number of trades and trading volume declined significantly. Stock return volatilities display an initial increase but a decline over the longer term, probably as traders become more comfortable in their new milieu.

AbstractWe examine changes in the intraday pattern of trading costs between pilot and control stocks during the US Securities and Exchange Commission tick size pilot program (TSPP). We find that intraday trading costs are relatively unchanged between pilot and control stocks in pre‐ and post‐TSPP periods. We find that differences in trading costs between pilot and control stocks during the TSPP are lower in the morning and greater toward the close. We also find that intraday differences in quoted depth between pilot and control stocks during the TSPP is lower at the beginning of the day, increases during the day, and falls toward the close of trading.

PurposeThe purpose of this paper is to examine changes in short‐sale transactions of target firms and acquiring firms around merger and acquisition (M&A) announcements using daily short‐sale transaction data from the New York stock exchange and NASDAQ. The paper further aims to investigate the link between short‐sale transactions and trading costs.Design/methodology/approachTwo abnormal short‐sale measures are developed. Two regression models based on the two short‐sale measures are constructed and ordinary least squares is used to estimate the regressions. Two samples to test bid‐ask spreads (BAS) before and after M&A announcements t‐test are used.FindingsThe paper finds that target firms experience significant excess short sales (ES) from day−1 to day+7; while acquiring firms experience significant ES from day 0 to day+20. For acquiring firms, the five‐day pre‐announcement abnormal short sale is negatively related to the announcement day return and is positively related to post‐announcement return. Such a relationship for target firms is not observed. For target firms, it is found that changes in short activity are not significantly related to changes in trading cost. For acquiring firms, short activity changes are positively related to quoted spreads and percentage quoted spreads. The short‐sale activity changes are negatively related to effective spreads.Research limitations/implicationsThe paper is a first step to understanding whether short sales affect market liquidity around M&A announcements; therefore restriction is necessary. Additional research can be done which should extend the current study to include the options market.Practical implicationsFrom the results, the paper cannot conclude that short sellers are informed traders around M&A announcements. Therefore restrictions on short sales around M&A announcements may not be warranted.Originality/valueThe paper fills an important blank in the existing literature by examining short‐sale transactions around M&A announcements. Such an investigation is of particular interest to market regulators as they try to update the short‐sale rules.

AbstractWe examine whether the different fee structures on equity exchanges, maker‐taker or taker‐maker, affects the frequency with which security prices cluster on round increments. We find higher price clustering on traditional maker‐taker venues relative to inverted taker‐maker venues. These results generally hold at the individual exchange level and across transaction‐ and quotation‐level clustering measures. Furthermore, we document that quoted depth, both inside and outside the best prices, is significantly greater on maker‐taker venues than on taker‐maker venues. We show that liquidity supply is the main economic driver behind the difference in price clustering between market structures. Our findings indicate that fees and rebates alter order‐routing strategies, which affect the precision of asset prices.

AbstractWe document an increase in limit order cancellation activity over the last decade and examine the impact of cancellation activity on market quality. Additionally, we test theoretical models pertaining to cancellation activity and study the differences in cancellation activity among the three largest exchanges. We find cancellation activity is detrimental to market quality. As predicted by theory, we find that cancellation activity increases with increases in the frequency with which traders contact the market and with increases in the uncertainty of the arrival rate of impatient traders. Finally, we document significant differences in cancellation activity between exchanges.