This work is partly funded by the National Science Council (Project Number NSC91-2416-H-008-022).
The Market Quality of Dealer versus Hybrid Markets: The Case of Moderately Liquid Securities
Article first published online: 8 FEB 2007
Journal of Business Finance & Accounting
Volume 34, Issue 1-2, pages 349–373, January/March 2007
How to Cite
Lai, H.-N. (2007), The Market Quality of Dealer versus Hybrid Markets: The Case of Moderately Liquid Securities. Journal of Business Finance & Accounting, 34: 349–373. doi: 10.1111/j.1468-5957.2006.00665.x
- Issue published online: 8 FEB 2007
- Article first published online: 8 FEB 2007
- (Paper received May 2005, revised version accepted April 2006)
- hybrid market;
- limit order;
- London Stock Exchange
Abstract: Over the last decade, electronic limit-order trading systems have been sweeping securities exchanges around the world. This paper studies a transitional case, namely, the commencement of trading of a group of moderately liquid stocks on SETS of the London Stock Exchange. The evidence reveals that the liquidity of those stocks dropped substantially after the introduction of the limit order book and the removal of the market makers' obligations. This transition provides an example that a hybrid market with a limit order book and voluntary dealers may not perform as well as a dealership market with obligatory market makers.