Equity trading and the allocation of market data revenue

Cecilia R. Caglio and Stewart Mayhew
Additional contact information
Cecilia R. Caglio: https://www.federalreserve.gov/econres/cecilia-r-caglio.htm

No 2012-65, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Revenues generated from the sales of consolidated data represent a substantial source of income for U.S. stock exchanges. Until 2007, consolidated data revenue was allocated in proportion to the number of reported trades. This allocation rule encouraged market participants to break up large trades and execute them in multiple pieces. Exchanges devised revenue-sharing and rebate programs that rewarded order-flow providers, and encouraged algorithmic traders to execute strategies involving large numbers of small trades. We provide evidence that data revenue allocation influenced the trading process, by examining trading activity surrounding various events that changed the marginal data revenue per trade.

Date: 2012
New Economics Papers: this item is included in nep-fmk and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.federalreserve.gov/pubs/feds/2012/201265/201265abs.html (text/html)
http://www.federalreserve.gov/pubs/feds/2012/201265/201265pap.pdf (application/pdf)

Related works:
Journal Article: Equity trading and the allocation of market data revenue (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2012-65

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().