Premium
The Persistence of Dominant‐Firm Market Share: Raising Rivals' Cost on the New York Stock Exchange
Author(s) -
Harris Frederick H. deB.,
Hyde Adam S.,
Wood Robert A.
Publication year - 2014
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.4284/0038-4038-2010.307
Subject(s) - stock exchange , market maker , business , stock market , financial economics , volatility (finance) , monetary economics , market share , scope (computer science) , market microstructure , share price , economics , finance , order (exchange) , paleontology , horse , computer science , biology , programming language
To explain the persistence of dominant New York Stock Exchange (NYSE) market share in stock trading of listed securities from 1992 to 2002, we develop a dominant‐firm price leadership model and hypothesize that NYSE specialists raised the costs of rival market makers. The model predicts that natural and induced cost advantages will determine the NYSE's market share vis‐à‐vis the regional exchanges, electronic trading systems, and NASDAQ dealers. Empirically, NYSE market share increases with economies of scale and scope, abnormal price volatility, high asymmetric information, and with trading practices that raise rivals' costs, such as failure to display limit orders that bettered the existing quotes.