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The Declining Role of NASDAQ Market Makers

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  • Jared Egginton

Abstract

We compare the liquidity providing behavior of NASDAQ market makers in 2010 to their behavior in 2004. We examine how frequently market makers are at the inside quote, what market and stock specific factors influence market makers’ behavior, and the relation between market maker participation and intraday bid-ask spread patterns. We observe a decrease in the percent of the trading day dealers’ quote at the inside, a decline in the number of market makers, and a decrease in the influence market makers have on intraday spread patterns. The results suggest that the role of NASDAQ market makers declines over time.

Suggested Citation

  • Jared Egginton, 2014. "The Declining Role of NASDAQ Market Makers," The Financial Review, Eastern Finance Association, vol. 49(3), pages 461-480, August.
    • Handle: RePEc:bla:finrev:v:49:y:2014:i:3:p:461-480
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    File URL: http://hdl.handle.net/10.1111/fire.12045
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    Cited by:

    1. Brogaard, Jonathan & Carrion, Allen & Moyaert, Thibaut & Riordan, Ryan & Shkilko, Andriy & Sokolov, Konstantin, 2018. "High frequency trading and extreme price movements," Journal of Financial Economics, Elsevier, vol. 128(2), pages 253-265.
    2. Arzé Karam, 2022. "Dealers' incentives to reveal their names," The Financial Review, Eastern Finance Association, vol. 57(1), pages 27-44, February.

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