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Does off-exchange trading decrease in the presence of uncertainty?

Stephen N. Jurich

The Quarterly Review of Economics and Finance, 2021, vol. 81, issue C, 201-213

Abstract: Much of the trading in U.S. equities has moved to off-exchange venues. This study examines the pecking order hypothesis of trade venue selection by analyzing the amount of off-exchange trade volume in periods of uncertainty. During the sample period, there were over two billion shares per day reported to the Nasdaq TRF-Carteret, which maintained more than 29 percent of the total market share of volume in U.S. securities. The TRF-NYSE captures more market share in Nasdaq-listed securities than NYSE-listed stocks. This study also sheds light on the introduction of the Nasdaq TRF-Chicago and its ability to attract volume. Ultimately, there is evidence that the amount of off-exchange volume decreases during periods of heightened volatility. The findings are of interest to market participants, exchange officials, and regulators.

Keywords: Trade volume; Volatility; Market share; Off-exchange venues; Fragmentation (search for similar items in EconPapers)
JEL-codes: G12 G14 G18 G23 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.qref.2021.05.007

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