The Specialist's Discretion: Stopped Orders and Price Improvement
When a market order arrives, the NYSE specialist can offer a price one tick better than the limit orders on the book and trade for his own account. Alternatively, the specialist can "stop" the market order, which means he guarantees execution at the current quote but provides the possibili...
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| Veröffentlicht in: | The Review of financial studies 1999, Vol.12 (5), p.1075-1112 |
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| container_end_page | 1112 |
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| container_issue | 5 |
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| container_title | The Review of financial studies |
| container_volume | 12 |
| creator | Ready, Mark J. |
| description | When a market order arrives, the NYSE specialist can offer a price one tick better than the limit orders on the book and trade for his own account. Alternatively, the specialist can "stop" the market order, which means he guarantees execution at the current quote but provides the possibility of price improvement. My model shows that specialists can use stops to sample the future order flow before making a commitment to trade. I present empirical evidence that both stops and immediate price improvement impose adverse selection costs on limit order traders. |
| doi_str_mv | 10.1093/rfs/12.5.1075 |
| format | Article |
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| fulltext | fulltext |
| identifier | ISSN: 0893-9454 |
| ispartof | The Review of financial studies, 1999, Vol.12 (5), p.1075-1112 |
| issn | 0893-9454 1465-7368 |
| language | eng |
| recordid | cdi_proquest_miscellaneous_38780401 |
| source | EBSCOhost Business Source Complete; Jstor Complete Legacy; Oxford University Press Journals Current |
| subjects | Adverse selection Business orders Costs Dealers Equilibrium Limit orders Liquidity Market orders Market prices Mathematical sequences Modeling Motivation New York City Prices Profits Securities trading Stock exchange Stock exchanges Stock prices Studies Trade Trade specialization U.S.A |
| title | The Specialist's Discretion: Stopped Orders and Price Improvement |
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