To succeed in attracting trading volume and generates revenue from trading fees, stock exchange must be able to handle rapidly potential dealers at a known price. This is known as the provision of liquidity. On the New York Stock Exchange, the liquidity comes from two sources: Dealer shops on the ground of the exchanged and those who electronically send orders for the exchange of off locations. On-exchange traders were said to have advantages over traditional off-flo … Read more »

To succeed in attracting trading volume and generates revenue from trading fees, stock exchange must be able to handle rapidly potential dealers at a known price. This is known as the provision of liquidity. On the New York Stock Exchange, the liquidity comes from two sources: Dealer shops on the ground of the exchanged and those who electronically send orders for the exchange of off locations. On-exchange traders have traditionally said to have advantages over off-exchange dealer. If that’s the case, then this could discourage off-exchange trading of providing liquidity and reduce the efficiency of the securities markets. We find that on-floor traders seem to have some advantages in providing liquidity to enjoy, although the differences were not large. This suggests that the New York Stock Exchange developed in several of his recent initiatives, the competition between on-and off-exchange trader level is justified.
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from
Robert Battalio,
Robert Jennings
Source: Business Horizons
10 pages.
Release date: 01 November 2007. Prod #: BH256-PDF-ENG
Offer competition for liquidity on the New York Stock Exchange HBR case solution

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