The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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The Behavior of Bid‐Ask Spreads and Volume in Options Markets during the Competition for Listings in 1999
Published: 11/07/2003 | DOI: 10.1046/j.1540-6261.2003.00611.x
Patrick De Fontnouvelle, Raymond P. H. Fishe, Jeffrey H. Harris
In August 1999, U.S. exchanges began to compete directly for order flow in many options that had been exclusively listed on another exchange, shifting 37% of option volume to multiple‐listing status by the end of September. Effective and quoted bid–ask spreads decrease significantly after multiple listings with spreads generally maintaining their initial lower levels 1 year later. These results hold for both time series and pooled regressions and are robust. We reject that economies of scale in market making cause the decrease in spreads and support the view that interexchange competition reduces option transaction costs.