Effects of market reform on the trading costs and depths of Nasdaq stocks

Michael J. Barclay, William G. Christie, Jeffrey H. Harris, Eugene Kandel, Paul H. Schultz

Research output: Contribution to journalArticlepeer-review

150 Scopus citations


The relative merits of dealer versus auction markets have been a subject of significant and sometimes contentious debate. On January 20, 1997, the Securities and Exchange Commission began implementing reforms that would permit the public to compete directly with Nasdaq dealers by submitting binding limit orders. Additionally, superior quotes placed by Nasdaq dealers in private trading venues began to be displayed in the Nasdaq market. We measure the impact of these new rules on various measures of performance, including trading costs and depths. Our results indicate that quoted and effective spreads fell dramatically without adversely affecting market quality.

Original languageAmerican English
Pages (from-to)1-34
Number of pages34
JournalJournal of Finance
Issue number1
StatePublished - Feb 1999


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