文档介绍：Price Discovery by ECNs
and Nasdaq Market Makers

Roger D. Huang
Owen Graduate School of Management
Vanderbilt University
Nashville, TN 37203
Email: roger.******@
Tel: 615-322-3723

First Version: October 25, 1999
This Version: March 29, 2000

I have benefited from discussions with Jim Angel, Cliff Ball, Suzanne Bellezza, Hans
Heidle, Tim McCormick, Jeffrey Smith, Hans Stoll, Sunil Wahal, and Simon Wu.
Christoph Schenzler provided programming help. This research was supported by the
Dean’s Fund for Research and by the Financial Markets Research Center at the Owen
Graduate School of Management, Vanderbilt University.
Price Discovery by ECNs and Nasdaq Market Makers

Abstract
This paper examines the discovery of an asset’s full-information value by electronic
works (ECNs) and Nasdaq market makers. The results show that
despite possible market fragmentation due to the addition of alternative trading venues,
quotes submitted by ECNs and dealers have information content and quotes on the same
asset mon information. The evidence also reveals that ECNs are important
contributors to the price discovery process, being the dominant venue in eight of the ten
most active stocks. Further analysis suggests that structural differences between ECNs
and Nasdaq market makers have an impact on price discovery. Specifically, ECNs’ share
of price discovery is enhanced by informed traders who are enticed by the ability to trade
anonymously but is impeded by liquidity traders who are attracted by the possibility of
lower trading costs.
Price Discovery by ECNs and Nasdaq Market Makers
1. Introduction
Trading mechanisms are judged on the basis of their ability to facilitate price
discovery and to provide transaction services at low While much research has
been devoted to the analysis of trading costs, few studies have investigated the proces