The Reporting of Island Trades on the Cincinnati Stock Exchange

Journal of Applied Finance, October, 2004 by Van Ness, Bonnie F; Van Ness, Robert A; Nguyen, Van T

Island is the largest electronic communications network in the US. On March 18th 2002, it began reporting trades to the Cincinnati Stock Exchange (CSE) to reduce costs. We use the information generated following this trade reporting change to analyze differences in trading characteristics and trading costs between Island and NASDAQ. The results indicate significantly lower effective spreads, percentage effective spreads, and traded spreads for Island trades. There is more trade price clustering on nickels, dimes, and quarters for NASDAQ trades. [G10, G14]

In early 2002, Island, the largest electronic communications network, announced it would begin reporting trades of NASDAQ securities to the Cincinnati Stock Exchange (CSE) rather than to the NASDAQ. On March 18, the CSE began...

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