The Economic Value of a Trading Floor: Evidence from the American Stock Exchange

Puneet Handa
Additional contact information
Puneet Handa: University of Iowa

The Journal of Business, 2004, vol. 77, issue 2, 331-356

Abstract: By comparing execution costs of trades handled by Amex floor brokers with trades entered through its automated post execution reporting (PER) system, this article provides evidence that floor brokers have value. Because they can opportunistically seize liquidity, using a floor broker is equivalent to placing a "smart" limit order. Overall, floor trades have a lower realized half-spread than PER trades (-3.06 bps vs. 4.43 bps). This finding holds for other measures of execution costs and is consistent across all order-size categories. The analysis of the value of intermediation in a securities market has implications for automated trading systems.

Date: 2004
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://dx.doi.org/10.1086/381279 main text (application/pdf)
Access to the online full text or PDF requires a subscription.

Related works:
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:ucp:jnlbus:v:77:y:2004:i:2:p:331-356

Access Statistics for this article

More articles in The Journal of Business from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().