Life After the Big Board Goes Electronic1
For over 200 years, change has come slowly at the New York Stock Exchange. By the turn of the twenty-first century, much electronic technology for handling orders and information had been introduced but the Big Board’s basic, floor-based trading structure was still intact. Today, trading remains centered at the posts of specialists who have an affirmative obligation to make fair and orderly markets, and who manage the limit order books (generally small orders). Intermediate-sized orders are routinely handled by floor traders, and large orders negotiated in the upstairs offices of the broker/dealer firms are commonly brought to the floor to be executed. Intermediaries (specialists and other floor traders) play a key role in making trades and, for large and mid-sized buy and sell orders, only minimal use is being made of the computer at the most critical point in the exchange process – when orders meet and are translated into trades.1
But much of this is now changing. In the Spring of...
KeywordsTrading Volume Equity Market Price Discovery Order Book Order Flow
We thank Miroslav Budimir, Rainer Riess, Martin Reck, and Jamie Selway for their assistance and comments on an earlier draft of this paper. We are also grateful to an anonymous referee and the editor, Rodney Sullivan, for additional useful comments.
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