"Trade-through prohibitions and market quality"
©
Journal of Financial Markets,
2005
Volume: 8
|
Issue: 14
|
Pages: 1-23
Publication type: Journal article
Research Archive Topic: Business Economics and Public Policy, Corporate Finance
Abstract
On September 4, 2002, the SEC implemented a de minimis exemption to the trade-through rule for three active ETFs, allowing markets to execute trades at prices up to three cents worse than those posted elsewhere. Relaxing the trade-through rule does not worsen ETF market quality. Effective and realized spreads are essentially unchanged or slightly smaller post-event, and prices become slightly more efficient. Part of the explanation is that, in these ETFs, tradethroughs are common, and their frequency changes little following the exemption. Thus, it is difficult to extrapolate from this regulatory experiment to draw broader policy conclusions about trade-through prohibitions.
Each author name for a Columbia Business School faculty member is linked to a faculty research page, which lists additional publications by that faculty member.
Each topic is linked to an index of publications on that topic.