Why Did NASDAQ Market Makers Stop Avoiding Odd-Eighth Quotes?

On May 26 and 27, 1994 several national newspapers reported the findings of Christie and Schultz (1994) who cannot reject the hypothesis that market makers of active NASDAQ stocks implicitly colluded to maintain spreads of at least $0.25 by avoiding odd-eighth quotes. On May 27, dealers in Amgen, Ci...

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Veröffentlicht in:	The Journal of finance (New York) 1994-12, Vol.49 (5), p.1841-1860
Hauptverfasser:	CHRISTIE, WILLIAM G., HARRIS, JEFFREY H., SCHULTZ, PAUL H.
Format:	Artikel
Sprache:	eng
Schlagworte:	Asked price Capital market Changes Collusion Computer systems Computers Corporations Fractions Insider dealing Market prices NASDAQ Nasdaq Composite Index Percentages Press Price volatility Securities trading Spread Statistical analysis Stock exchange Stock exchanges Stock prices Stock shares Studies U.S.A
Online-Zugang:	Volltext
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Zusammenfassung:	On May 26 and 27, 1994 several national newspapers reported the findings of Christie and Schultz (1994) who cannot reject the hypothesis that market makers of active NASDAQ stocks implicitly colluded to maintain spreads of at least $0.25 by avoiding odd-eighth quotes. On May 27, dealers in Amgen, Cisco Systems, and Microsoft sharply increased their use of odd-eighth quotes, and mean inside and effective spreads fell nearly 50 percent. This pattern was repeated for Apple Computer the following trading day. Using individual dealer quotes for Apple and Microsoft, we find that virtually all dealers moved in unison to adopt odd-eighth quotes.
ISSN:	0022-1082 1540-6261
DOI:	10.1111/j.1540-6261.1994.tb04783.x