Ebook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2
➤ Gửi thông báo lỗi ⚠️ Báo cáo tài liệu vi phạmNội dung chi tiết: Ebook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2
Ebook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2
Chapter 6Intraday Trading of Island (As Reported to the Cincinnati stock Exchange) and NASDAQ__________________Van T. NguyenUniversity of Mississippi, Ebook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2, USABonnie F. Van NessUniversity of Mississippi, USARobert A. Van NessUniversity of Mississippi, USAOn March IS, 2002. Island began reporting its trades lo the Cincinnati Slock Exchange. This change in reporting allows US to examine Island's trading behavior. We find distinct intraday patterns lor Ebook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2the number of trades and volume. Both NASDAQ and Island exhibit intraday U-shaped patterns for the number of trades and volume, however, the differencEbook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2
e in the two also shows a U-shaped pattern. In addition, we analyze the probability of in Conned trading around the reporting change. We find no diffeChapter 6Intraday Trading of Island (As Reported to the Cincinnati stock Exchange) and NASDAQ__________________Van T. NguyenUniversity of Mississippi, Ebook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2ormed trading for NASDAQ before and after the change.Keywords: Intraday patterns of volume: probability of informed trading; electronic communication networks: Island; NASDAQ market system.1IntroductionOn March 18 of 2002. Island. NASDAQ’s largest Electronic Communication Network (ECN) began reporti Ebook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2ng trades to the Cincinnati Stock Exchange (CSE). Previously, trades on Island were reported to NASDAQ.1 Island initiated this reporting change as a cEbook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2
ost savings move.2 The arrangement between the CSE and Island involves a revenue-sharing and rebate plan, where the CSE sends back part of the revenueChapter 6Intraday Trading of Island (As Reported to the Cincinnati stock Exchange) and NASDAQ__________________Van T. NguyenUniversity of Mississippi, Ebook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2 form of a rebate which, in turn, helps them increase market share in NASDAQ stocks. This reporting change allows US to study Island's1Island announced that the reporting of quotes to the CSE would begin at a later point in lime.2For more information about this move, see Nguyen. Van Ness and Van Nes Ebook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2s (2003).8990 Van T. Nguyen, Bonnie F. Van Ness <£• Robert A. Van Nesstrading behavior since we can now delineate their transactions from those of NASEbook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2
DAQ dealers.Island is registered with the Securities and Exchange Commission as a broker-dealer. It operates within the NASDAQ market as an ElectronicChapter 6Intraday Trading of Island (As Reported to the Cincinnati stock Exchange) and NASDAQ__________________Van T. NguyenUniversity of Mississippi, Ebook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2 (Exchange Act), and as an alternative trading system (ATS) pursuant to Regulation ATS of the Exchange Act. As of March 2002, Island represents approximately one out of five trades in NASDAQ securities3 — making Island one of the technology leaders in electronic market places.Island operates as a tr Ebook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2ansparent automated limit order book with automatic matching capabilities. Trades occur on Island when a buy order and a sell order match on Island’sEbook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2
limit order book, or when a buy/sell order on Island matches with another buy/sell order from another market maker. With the exception of All-or-None Chapter 6Intraday Trading of Island (As Reported to the Cincinnati stock Exchange) and NASDAQ__________________Van T. NguyenUniversity of Mississippi, Ebook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2wing through their web site.42Literature and BackgroundMany researchers examine intraday patterns of trading activity and the bidask spread. Wood, Mclnish and Ord (1985) find that NYSE slocks exhibit a U-shaped pattern in returns. Hams (1986) finds that Monday has a slightly different intraday patte Ebook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2rn than the rest of the week — but this difference is only during the first 45 minutes of trading.Spreads exhibit intraday patterns somewhat similar tEbook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2
o trading. Mclnish and Wood (1992). Brock and Kleidon (1992). Lee. Mucklow and Ready (1993). and Chan. Chung and Johnson (1995) document U-shaped pattChapter 6Intraday Trading of Island (As Reported to the Cincinnati stock Exchange) and NASDAQ__________________Van T. NguyenUniversity of Mississippi, Ebook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2th inventory and information issues. Chung. Van Ness and Van Ness (1999) find that limit orders explain much of the intraday variation in the NYSE spreads. A different pattern is found for NASDAQ stocks. Chan. Christie and Schultz (1995) find that3Nguyen. Van Ness and Van Ness (2003).4Not all orders Ebook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2 are publicly viewable. Subscribers may enter orders on Island’s limit order book for display to all other subscribers, or may enter orders on the limEbook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2
it order book on a non-display basis. Orders designated for display are visible to all subscribers.Intraday Trading of Island and NASDAQ 91NASDAQ spreChapter 6Intraday Trading of Island (As Reported to the Cincinnati stock Exchange) and NASDAQ__________________Van T. NguyenUniversity of Mississippi, Ebook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2aver and Whitcomb (2003) examine data (September 15-26. 1997) after the SEC order handling rules and (he change of NASDAQ to (rading/qnoting in 16ths of a dollar. They find (hat ECNs are alone al the best bid and offer about 19% of (he lime, and more often al the ask than at the bid. Additionally, t Ebook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2he authors find that Instinct quotes al lhe BBO lhe most of any ECN.5 Also, the authors find a distinct pattern for quotes — ECNs lend not lo be al thEbook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2
e inside (alone) of lhe quote in the first half-hour of trading, but they are more likely lo be alone al the inside quote during the last hour of tradChapter 6Intraday Trading of Island (As Reported to the Cincinnati stock Exchange) and NASDAQ__________________Van T. NguyenUniversity of Mississippi, Ebook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2to the market through transactions on ECNs than through trades occurring with market makers. Additionally, they find ECNs have lower effective spreads for medium and large trades than market makers, but not for small trades (unless the trade occurs on a non-integcr price).Bias. Bisicrc and spatt (20 Ebook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 202) directly examine the ECN. Island. They find that NASDAQ spreads arc constrained prior to decimalization, and that limit order traders use Island aEbook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2
s a platform to compete for liquidity. After decimalization, the spreads on Island narrow and the rents earned by Island traders virtually disappear.HChapter 6Intraday Trading of Island (As Reported to the Cincinnati stock Exchange) and NASDAQ__________________Van T. NguyenUniversity of Mississippi, Ebook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2ll level of NASDAQ trading in the firm. Additionally, they find that over one quarter of the limit orders submitted to Island were cancelled, and that there is a substantial use of non-displayed limit orders on Island (Island allows investors the option of not displaying their order — but if the ord Ebook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2er transacts, the trade is shown to the market).Huang (2002) and Tse and Hackard (2003) examine price discovery of ECNs. Huang investigates the ten moEbook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2
st active NASDAQ stocks and finds that ECNs add to price discovery, and additionally, promote market quality rather than degrade market quality due toChapter 6Intraday Trading of Island (As Reported to the Cincinnati stock Exchange) and NASDAQ__________________Van T. NguyenUniversity of Mississippi, Ebook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2ry process for QQQ.5Island and Instinet merged in 2002.92 Van T. Nguyen, Bonnie F. Van Ness Ẳ- Robert A. Van NessThe purpose of this study is to add to the understanding of ECNs. specifically. we will analyze (he intraday behavior of Island. Little research regarding the intraday trading behavior of Ebook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2 ECNs is documented. Simaan, Weaver and Whitcomb (2003) study the intraday pattern of quotes for ECNs. Tse and Hackard (2003) look at the intraday patEbook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2
tern of volume, number of trades and spreads of Island for only one security, the exchange traded fund. QQQ. We add to this literature stream by examiChapter 6Intraday Trading of Island (As Reported to the Cincinnati stock Exchange) and NASDAQ__________________Van T. NguyenUniversity of Mississippi, Ebook Advances in quantitetive analysis of finance and accounting (Vol 2): Part 2ing CharacteristicsChapter 6Intraday Trading of Island (As Reported to the Cincinnati stock Exchange) and NASDAQ__________________Van T. NguyenUniversity of Mississippi,Gọi ngay
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