Market Structure and the Intraday Pattern of Bid-Ask Spreads for NASDAQ Securities

This article examines the intraday pattern of bid-ask spreads among NASDAQ stocks. We find that spreads are relatively stable throughout the day but narrow significantly near the close. This contrasts with the U-shaped pattern for NYSE stocks reported by Brock and Kleidon and McInish and Wood. We at...

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Bibliographic Details
Published in:	The Journal of business (Chicago, Ill.) Vol. 68; no. 1; pp. 35 - 60
Main Authors:	Chan, K. C., Christie, William G., Schultz, Paul H.
Format:	Journal Article
Language:	English
Published:	Chicago, Ill University of Chicago Press 01-01-1995 University of Chicago, acting through its Press
Subjects:	Financial market structures Inventories Investors Market power Market prices Market structure Nasdaq Composite Index New York Order flow Securities Securities issues Securities markets Stock exchange Stock exchanges Stock prices Trade specialization Trade volume U.S.A
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Summary:	This article examines the intraday pattern of bid-ask spreads among NASDAQ stocks. We find that spreads are relatively stable throughout the day but narrow significantly near the close. This contrasts with the U-shaped pattern for NYSE stocks reported by Brock and Kleidon and McInish and Wood. We attribute these divergent patterns to structural differences between specialist and dealer markets. The wider spreads for NYSE stocks near periods of market closure may reflect the market power of specialists. The decline in spreads near the close for NASDAQ stocks is consistent with inventory control by individual dealers.
Bibliography:	ObjectType-Article-2 SourceType-Scholarly Journals-1 ObjectType-Feature-1 content type line 23
ISSN:	0021-9398 1537-5374
DOI:	10.1086/296652