Market maker performance: the search for fair weather market makers
Market maker performance: the search for fair weather market makers
The London Stock Exchange has long been concerned that some market makers do not fulfill their obligations. This study describes a range of measures to identify such fair weather market makers. The results indicate that three firms of market makers meet the criteria for fair weather market making. It is also discovered that market makers in a given stock all quote the same fixed spread in round pennies and that this is about twice the touch. Internalized order flow is pervasive, with market makers receiving 57% of their order flow from associated brokers. However, fair weather market making is found to be distinct from order preferencing and internalization.
market making, London Stock Exchange, bid-ask spreads, internalization, order preferencing
259-276
Board, J.
3ee6543a-c316-41b4-b89a-0e761e0447ce
Sutcliffe, C.
95f94790-b30c-428a-b1d4-4fc9d1555dfe
Vila, A.
365cb272-2018-41c1-9723-426fa2fbcae8
2000
Board, J.
3ee6543a-c316-41b4-b89a-0e761e0447ce
Sutcliffe, C.
95f94790-b30c-428a-b1d4-4fc9d1555dfe
Vila, A.
365cb272-2018-41c1-9723-426fa2fbcae8
Board, J., Sutcliffe, C. and Vila, A.
(2000)
Market maker performance: the search for fair weather market makers.
Journal of Financial Services Research, 17 (3), .
Abstract
The London Stock Exchange has long been concerned that some market makers do not fulfill their obligations. This study describes a range of measures to identify such fair weather market makers. The results indicate that three firms of market makers meet the criteria for fair weather market making. It is also discovered that market makers in a given stock all quote the same fixed spread in round pennies and that this is about twice the touch. Internalized order flow is pervasive, with market makers receiving 57% of their order flow from associated brokers. However, fair weather market making is found to be distinct from order preferencing and internalization.
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Published date: 2000
Keywords:
market making, London Stock Exchange, bid-ask spreads, internalization, order preferencing
Identifiers
Local EPrints ID: 35954
URI: http://eprints.soton.ac.uk/id/eprint/35954
ISSN: 0920-8550
PURE UUID: 36f70499-e550-4231-8767-26704b1a444c
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Date deposited: 26 Jul 2006
Last modified: 08 Jan 2022 18:57
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Contributors
Author:
J. Board
Author:
C. Sutcliffe
Author:
A. Vila
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