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| Author: | Mayhew, S. |
| Title: | Competition, market structure, and bid-ask spreads in stock option markets |
| Journal: | Journal of Finance
2002 : APR, VOL. 57:2, p. 931-958 |
| Index terms: | Stock markets Stock exchanges Investment Service Competition Statistical methods USA |
| Language: | eng |
| Abstract: | This paper examines the effects of competition and market structure on equity option bid-ask spreads from 1986 to 1997. Options listed on multiple exchanges have narrower spreads than those listed on a single exchange, but the difference diminishes as option volume increases. Option spreads become wider when a competing exchange delists the option. Options traded under a designated primary marketmaker (DPM) have narrower quoted spreads than those traded in a traditional open outcry crowd. Effective spreads are found to be slightly narrower under the DPM than in the crowd, but only since 1992, and only on low-volume options. |
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