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Sub-Penny and Queue-Jumping

Sabrina Buti, Francesco Consonni, Barbara Rindi () and Ingrid M. Werner
Additional contact information
Sabrina Buti: University of Toronto
Francesco Consonni: Bocconi University
Ingrid M. Werner: OH State University

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: Sub-Penny Trading (SPT) is a form of dark trading that allows traders to undercut displayed liquidity. We distinguish between SPT that is queue jumping (QJ) and mid- crossing (MID) and find that QJ is higher for NASDAQ than NYSE stocks. Consistently with Buti, Rindi, Wen and Werner (2013), QJ is positively related to depth and negatively related to stock price. We also find that QJ is associated with improved lit market quality, especially for large capitalization stocks. Sub-penny quotes are allowed for stocks priced below $1.00, and we use this fact to show that QJ increases, the spread improves but depth deteriorates as the price of a stock crosses from above to below ($1.00).

JEL-codes: G10 G12 G14 G18 G20 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mst
Date: 2013-11
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2013-18

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