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Does off-exchange trading decrease in the presence of uncertainty?

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  • Jurich, Stephen N.

Abstract

Much of the trading in U.S. equities has moved to off-exchange venues. This study examines the pecking order hypothesis of trade venue selection by analyzing the amount of off-exchange trade volume in periods of uncertainty. During the sample period, there were over two billion shares per day reported to the Nasdaq TRF-Carteret, which maintained more than 29 percent of the total market share of volume in U.S. securities. The TRF-NYSE captures more market share in Nasdaq-listed securities than NYSE-listed stocks. This study also sheds light on the introduction of the Nasdaq TRF-Chicago and its ability to attract volume. Ultimately, there is evidence that the amount of off-exchange volume decreases during periods of heightened volatility. The findings are of interest to market participants, exchange officials, and regulators.

Suggested Citation

  • Jurich, Stephen N., 2021. "Does off-exchange trading decrease in the presence of uncertainty?," The Quarterly Review of Economics and Finance, Elsevier, vol. 81(C), pages 201-213.
    • Handle: RePEc:eee:quaeco:v:81:y:2021:i:c:p:201-213
    DOI: 10.1016/j.qref.2021.05.007
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    References listed on IDEAS

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    1. Suchismita Mishra & Le Zhao, 2021. "Order Routing Decisions for a Fragmented Market: A Review," JRFM, MDPI, vol. 14(11), pages 1-32, November.

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    More about this item

    Keywords

    Trade volume; Volatility; Market share; Off-exchange venues; Fragmentation;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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