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Non-positive spreads and trading venue halts: Are investors harmed?

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  • Favreau, Charles
  • Garvey, Ryan

Abstract

Locked and crossed quotations in U.S. equity markets have, surprisingly, increased in number since their 2007 prohibition. In 2019, there are 260 million occurrences where the National Best Bid is equal to, or greater than, the National Best Offer. Although non-positive spreads clear quickly, their presence can still harm investors. When the bid–ask spread changes from positive to non-positive, many dark markets suspend trading, which results in a decrease in the percentage of dark trades. Dark markets often match trades at/within the spread, so the decline in dark trading coincides with more trading outside of best market prices.

Suggested Citation

  • Favreau, Charles & Garvey, Ryan, 2022. "Non-positive spreads and trading venue halts: Are investors harmed?," Finance Research Letters, Elsevier, vol. 46(PA).
    • Handle: RePEc:eee:finlet:v:46:y:2022:i:pa:s1544612321003706
    DOI: 10.1016/j.frl.2021.102368
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    References listed on IDEAS

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