Title

Market Competition and Price Clustering: Evidence from the ETF Market

Translated Titles

市場競爭與價格群聚:ETF市場之分析

DOI

10.6545/JFS.201812_26(4).0001

Authors

徐淑芳(Shufang Hsu);鍾惠民(Huimin Chung);陳煒朋(Wei-Peng Chen)

Key Words

Exchange traded funds (ETFs) ; price clustering ; liquidity ; multimarket trading ; ETFs ; 價格群聚 ; 流動性 ; 多重市場交易

PublicationName

財務金融學刊

Volume or Term/Year and Month of Publication

26卷4期(2018 / 12 / 31)

Page #

1 - 44

Content Language

英文

Chinese Abstract

We explore the impact of UTP implementation on ETF price clustering. The empirical results show a discernible reduction in price clustering on the overall market, attributable to improvements in the liquidity of order flow. After UTP trading commenced on the NYSE, large traders can more easily split their orders into smaller sizes and move to the optimal trading venue. These findings show feasible explanations for the relative competitive advantage associated with executing large orders once the NYSE entry reduced negotiation risks due to increasing competition among market makers, public availability of price information, and the alleviation of price risk.

English Abstract

本文探討NYSE因UTP制度開始交易ETF後,對ETF價格群聚的影響。實證結果發現,多重市場交易有助提升市場流動性,並降低價格群聚,且對大單尤其明顯。推論此結果可歸因於多重市場交易使投資人拆單更容易,增加造市者之間的競爭,提升資訊透明度,降低價格風險,因此有助於減少協商議價過程的風險,而此對大單的影響特別重要。

Topic Category 社會科學 > 經濟學
社會科學 > 財金及會計學
Reference
  1. Abukari, Kobana,Otchere, Isaac K.(2016).Merging corporatized financial markets.Journal of Financial Studies,24,1-44.
    連結:
  2. Abukari, Kobana,Otchere, Isaac K.(2016).Merging corporatized financial markets.Journal of Financial Studies,24,1-44.
    連結:
  3. Aitken, Michael,Brown, Philip,Buckland, Christine,Izan, Haji Y.,Walter, Terry(1996).Price clustering on the Australian Stock Exchange.Pacific-Basin Finance Journal,4,297-314.
  4. Alexander, Gordon J.,Peterson, Mark A.(2007).An analysis of trade-size clustering and its relation to stealth trading.Journal of Financial Economics,84,435-471.
  5. Ap Gwilym, Owain,Alibo, Evamena(2003).Decreased price clustering in FTSE 100 futures contracts following the transfer from floor to electronic trading.Journal of Futures Markets,23,647-659.
  6. Ap Gwilym, Owain,Clare, Andrew,Thomas, Stephen(1998).Extreme price clustering in the London equity index futures and options markets.Journal of Banking and Finance,22,1193-1206.
  7. Ap Gwilym, Owain,Verousis, Thanos(2010).Price clustering and underpricing in the IPO aftermarket.International Review of Financial Analysis,19,89-97.
  8. Aşçıoğlu, Aslı,Comerton-Forde, Carole,McInish, Thomas H.(2007).Price clustering on the Tokyo Stock Exchange.Financial Review,42,289-301.
  9. Ball, Clifford A.,Torous, Walter N.,Tschoegl, Adrian E.(1985).The degree of price resolution: The case of the gold market.Journal of Futures Markets,5,29-43.
  10. Barclay, Michael J.,Warner, Jerold B.(1993).Stealth and volatility: Which trades move prices?.Journal of Financial Economics,34,281-306.
  11. Blau, Benjamin M.,van Ness, Bonnie F.,van Ness, Robert A.(2012).Trade size and price clustering: The case of short sales and the suspension of price tests.Journal of Financial Research,35,159-182.
  12. Boehmer, Beatrice,Boehmer, Ekkehart(2003).Trading your neighbor's ETFS: Competition or fragmentation?.Journal of Banking and Finance,27,1667-1703.
  13. Bollen, Nicolas P. B.,Whaley, Robert E.(1998).Are "teenies" better?.Journal of Portfolio Management,25,10-24.
  14. Broom, Kevin D.,van Ness, Robert A.,Warr, Richard S.(2007).Cubes to quads: The move of QQQ from AMEX to NASDAQ.Journal of Economics and Business,59,520-535.
  15. Brown, Philip,Chua, Angeline,Mitchell, Jason(2002).The influence of cultural factors on price clustering: Evidence from Asia-Pacific stock markets.Pacific-Basin Finance Journal,10,307-332.
  16. Cespa, Giovanni,Foucault, Thierry(2014).Illiquidity contagion and liquidity crashes.Review of Financial Studies,27,1615-1660.
  17. Chakravarty, Sugato(2001).Stealth-Trading: Which traders' trades move stock prices?.Journal of Financial Economics,61,289-307.
  18. Chowdhry, Bhagwan,Nanda, Vikram(1991).Multimarket trading and market liquidity.Review of Financial Studies,4,483-511.
  19. Christie, William G.,Schultz, Paul H.(1994).Why do NASDAQ market makers avoid odd-eighth quotes?.Journal of Finance,49,1813-1840.
  20. Chung, Huimin,Chiang, Shumei(2006).Price clustering in E-mini and floor-traded index futures.Journal of Futures Markets,26,269-296.
  21. Chung, Kee H.,Kim, Kenneth A.,Kitsabunnarat, Pattanaporn(2005).Liquidity and quote clustering in a market with multiple tick size.Journal of Financial Research,28,177-195.
  22. Chung, Kee H.,van Ness, Bonnie F.,van Ness, Robert A.(2002).Spreads, depths, and quote clustering on the NYSE and NASDAQ: Evidence after the 1997 Securities and Exchange Commission rule changes.Financial Review,37,481-505.
  23. Chung, Kee H.,van Ness, Bonnie F.,van Ness, Robert A.(2004).Trading costs and quote clustering on the NYSE and NASDAQ after decimalization.Journal of Financial Research,27,309-328.
  24. Davis, Ryan L.,van Ness, Bonnie F.,van Ness, Robert A.(2014).Clustering of trade prices by high-frequency and non-high-frequency trading firms.Financial Review,49,421-433.
  25. De Winne, Rudy,Gresse, Carole,Platten, Isabelle(2014).Liquidity and risk sharing benefits from opening an ETF market with liquidity providers: Evidence from the CAC 40 index.International Review of Financial Analysis,34,31-43.
  26. Easley, David,O'Hara, Maureen(1987).Price, trade size, and information in securities markets.Journal of Financial Economics,19,69-90.
  27. Goldstein, Itay,Li, Yan,Yang, Liyan(2014).Speculation and hedging in segmented markets.Review of Financial Studies,27,881-922.
  28. Goodhart, Charles,Curcio, Riccardo(1991).,未出版
  29. Grossman, Sanford J.,Miller, Merton H.,Cone, Kenneth R.,Fischel, Daniel R.,Ross, David J.(1997).Clustering and competition in asset markets.Journal of Law and Econоmіcs,40,23-60.
  30. Hall, Peter N.(2004).Bucking the trend: The unsupportability of index providers' imposition of licensing fees for unlisted trading of exchange traded funds.Vanderbilt Law Review,57,1125-1170.
  31. Hamilton, James D.(1994).Time Series Analysis.Princeton University Press.
  32. Harris, Larry(2003).Trading and Exchange: Market Microstructure for Practitioners.Oxford University Press.
  33. Harris, Lawrence(1991).Stock price clustering and discreteness.Review of Financial Studies,4,389-415.
  34. Hasbrouck, Joel(1995).One security, many markets: Determining the contributions to price discovery.Journal of Finance,50,1175-1199.
  35. Hasbrouck, Joel(1999).Security bid-ask dynamics with discreteness and clustering: Simple strategies for modeling and estimation.Journal of Financial Markets,2,1-28.
  36. Hausman, Jerry A.(1978).Specification tests in econometrics.Econometrica,46,1251-1271.
  37. Hegde, Shantaram P.,McDermott, John B.(2003).The liquidity effects of revisions to the S&P 500 index: An empirical analysis.Journal of Financial Markets,6,413-459.
  38. Hegde, Shantaram P.,McDermott, John B.(2004).The market liquidity of DIAMONDS, Q's, and their underlying stocks.Journal of Banking and Finance,28,1043-1067.
  39. Hornik, Jacob,Cherian, Joseph,Zakay, Dan(1994).The influence of prototypic values on the validity of studies using time estimates.Journal of the Market Research Society,36,145-148.
  40. Huang, Roger D.,Stoll, Hans R.(1996).Dealer versus auction markets: A paired comparison of execution costs on the NASDAQ and the NYSE.Journal of Financial Economics,41,313-357.
  41. Ikenberry, David L.,Weston, James P.(2008).Clustering in U.S. stock prices after decimalization.European Financial Management,14,30-54.
  42. Madura, Jeff,Ngo, Thanh(2008).Impact of ETF inception on the valuation and trading of component stocks.Applied Financial Economics,18,995-1007.
  43. Martinez, Valeria,Tse, Yiuman(2006).Multi-Market trading of gold futures.Review of Futures Markets,15,239-263.
  44. Meng, Lei,Verousis, Thanos,ap Gwilym, Owain(2013).A substitution effect between price clustering and size clustering in credit default swaps.Journal of International Financial Markets, Institutions Money,24,139-152.
  45. Nguyen, Vanthuan,van Ness, Bonnie F.,van Ness, Robert A.(2007).Short- and long-term effects of multimarket trading.Financial Review,42,349-372.
  46. Niederhoffer, Victor(1966).A new look at clustering of stock prices.Journal of Business,39,309-313.
  47. Ohta, Wataru(2006).An analysis of intraday patterns in price clustering on the Tokyo Stock Exchange.Journal of Banking and Finance,30,1023-1039.
  48. Parkinson, Michael(1980).The extreme value method for estimating the variance of the rate of return.Journal of Business,53,61-65.
  49. Richie, Nivine,Madura, Jeff(2007).Impact of the QQQ on liquidity and risk of the underlying stocks.Quarterly Review of Economics and Finance,47,411-421.
  50. Schwartz, Adam L.,van Ness, Bonnie F.,van Ness, Robert A.(2004).Clustering in the futures markets: Evidence from S&P 500 futures contracts.Journal of Futures Markets,24,413-428.
  51. Securities and Exchange Commission, 2003, Self-Regulatory organizations; Notice of filing and immediate effectiveness of proposed rule change by the New York Stock Exchange, Inc. Relating to elimination of the exception to rule 123(e) for exchange-traded funds, Federal Register 68, 19063-19065.
  52. Tse, Yiuman,Erenburg, Grigori(2003).Competition for order flow, market quality and price discovery in the NASDAQ-100 index tracking stock.Journal of Financial Research,26,301-318.
  53. Tse, Yiuman,Zabotina, Tatyana V.(2001).Transaction costs and market quality: Open-Outcry versus electronic trading.Journal of Futures Markets,21,713-735.
  54. Verousis, Thanos,ap Gwilym, Owain(2013).Trade size clustering and the cost of trading at the London Stock Exchange.International Review of Financial Analysis,27,91-102.
  55. Wang, Jianxin(2013).Liquidity commonality among Asian equity markets.Pacific-Basin Finance Journal,21,1209-1231.
  56. Yu, Ip-Wing,Fung, Kang-Por,Tam, Chi-Sang(2010).Assessing financial market integration in Asia equity markets.Journal of Banking and Finance,34,2874-2885.