Abstract
We analyze the use of alternative trading systems in a large sample of institutional orders and the trades that constitute these orders. Proprietary data allow us to distinguish between orders and trades filled by day and after-hours crossing systems, electronic communication networks (ECNs), and traditional brokers. Controlling for variation in order and security characteristics, as well as endogeneity in the choice of trading venue, we find that realized execution costs are generally lower on alternative trading systems. Order handling rules and tick size changes implemented in 1997 appear to have reduced the cost advantage of trading on ECNs.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 99-134 |
| Number of pages | 36 |
| Journal | Journal of Financial Economics |
| Volume | 70 |
| Issue number | 1 |
| DOIs | |
| State | Published - Oct 1 2003 |
| Externally published | Yes |
Keywords
- Alternative trading systems
- Crossing systems
- Electronic communications networks
- Execution costs
- Institutional trading
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics
- Strategy and Management