Report on the Comparison of Order Executions

Across Equity Market Structures

Office of Economic Analysis

United States Securities and Exchange Commission

January 8, 2001
Report on the Comparison of Order Executions Across Equity Market Structures

Table of Contents

Executive Summary ......................................................................................................... i

I. Introduction......................................................................................................... 1

II. Background ......................................................................................................... 2

III. Data for the study ................................................................................................ 3

A. Sample of stocks.......................................................................................... 3

B. Data Sources................................................................................................ 4

C. Matching of Nasdaq stocks to NYSE stocks................................................. 5

D. Definitions of the Very Large, Large, Middle and Small Categories............. 8

E. Definitions of Statistics................................................................................ 8

IV. Comparison of Nasdaq Execution Costs to NYSE Execution Costs ................... 10

A. Statistical Methods..................................................................................... 10

B. Results For Execution Costs ...................................................................... 14

C. Time to Execution and Fill Rates............................................................... 17

V. Variance Ratio Tests.......................................................................................... 17

A. Motivation ................................................................................................. 17

B. Data and Return Calculation ...................................................................... 18

C. Methodology for Variance Ratios .............................................................. 20

D. Results....................................................................................................... 20

E. Inefficiencies Beyond Effective Spreads.................................................... 21

F. Additional Tests Using Variance Ratios..................................................... 22

VI. Summary ........................................................................................................... 23

Appendix A: Academic Literature Review .................................................................. A1

Comparisons of the Same Stock Across Different Markets............................... A1

Comparisons of Matched Stocks across Different Markets................................ A3

Synopsis of Control Variables .......................................................................... A4

Appendix B: Graphical Comparison of NYSE and NASDAQ Stocks...........................B1

Appendix C: OATS Execution Prices............................................................................C1

Procedures to Match Executed OATS Records to ACT Trade Reports...............C1

Other Procedures to Match ................................................................................C3

Summary of Other Match Procedures................................................................C4

Matching Orders Routed Through SelectNet .....................................................C4

Appendix D: Summary of Executed Orders and Executed Shares................................. D1

Appendix E: NYSE Listing Requirements.....................................................................E1

Appendix F: Matching Stocks.......................................................................................F1
i

Executive Summary

Background

This Report on the Comparison of Order Executions Across Equity Market

Structures, prepared by the Commission’s Office of Economic Analysis, is part of the

Commission’s ongoing inquiry into market fragmentation and its possible effects on the

quality of execution of investor orders in the National Market System. The Report

considers whether order executions differ in markets with differing levels of

fragmentation and customer order interaction. It compares the executions of customer

orders in securities listed on Nasdaq (a relatively fragmented, primarily dealer market

structure) to the executions of customer orders in NYSE-listed securities that are routed

to the NYSE (a primarily agency/auction market center that handles approximately 80%

of trading volume in these securities).

The Report uses customer order data, which has only recently come available for

Nasdaq securities. This enables accurate calculation of effective and realized spreads and

order execution speeds, and also allows separate analysis of different types of orders. For

the most part, the Report uses measures that will soon be available directly from market

centers under Securities Exchange Act Rule 11Ac1-5 -- the Commission’s recently

adopted Execution Quality Disclosure Rule.

Obviously, any comparative analysis of market structures is necessarily complex.

In spite of the fact that every attempt has been made to design the tests and present the

results in a clear and unbiased manner, there are three important caveats that should be

carefully considered by anyone reviewing this Report:

• There is no single, all-encompassing measure of execution quality. For example,

although effective spread is an important component, some investors may prefer a

fast execution at a guaranteed price (often available for small orders in Nasdaq

securities at dealer market centers) to a slower execution with the possibility of

price improvement (often available for small orders on the NYSE). In addition,

effective spread measures the handling of a single trade, without considering the

ability of a market structure to absorb a series of trades with minimal price

volatility.

• Due to feasibility considerations, the size of the sample is somewhat limited. The

one-week period of June 5, 2000 to June 9, 2000 covers a single, relatively tranquil

episode that followed a period of higher stress and volatility. The results may

differ under a different set of circumstances.

• Although the Report uses both matched-sample and regression techniques to try to

control for the differences between the stocks that are listed on Nasdaq and the

NYSE, these controls can never be perfect. Thus, there is always the possibility

that the reported results are driven by remaining differences between the stocks

rather than by differences in the degree of order interaction between the two

market structures.
ii

Methods

The results are separately calculated for four categories of Nasdaq stocks:

1) A group of the very largest Nasdaq stocks in terms of trading volume and

market capitalization, as specifically selected by Nasdaq

2) A random sample of Nasdaq stocks with market capitalization over

$1 billion

3) A random sample of Nasdaq stocks with market capitalization between

$200 million and $1 billion

4) A random sample of Nasdaq stocks with market capitalization less than

$200 million

For easy reference throughout the Report, these categories are referred to as “very large”,

“large,” “middle,” and “small,” respectively.

In selecting the stocks for the Report, some initial filters were applied to ensure

the availability of adequate historical information. The data in the report include

customer orders for the week of June 5-9, 2000 taken from the Order Audit Trail System

(OATS). These orders are for a total of 221 Nasdaq stocks, 25 of which were specifically

selected by Nasdaq as being their top stocks in terms of trading volume and market

capitalization (the very large category). The Commission staff selected the remaining

196 Nasdaq stocks by taking a random sample of Nasdaq stocks stratified by dollar

trading volume. The Report includes data from the System Order Data (SOD) file for all

1141 NYSE stocks that pass the same initial filters used to construct the Nasdaq sample.

The Report includes a “matched pair” analysis that compares order executions in

Nasdaq-listed stocks to NYSE order executions in NYSE-listed stocks, where the stocks

in each pair have similar market capitalization, share price, return volatility and trading

volume. For each measure, the first test uses only the 58 pairs that have the smallest

aggregate differences across the four criteria. This analysis is complemented and

confirmed by eleven other tests that use larger samples and use regression techniques to

control for differences in these and other features. Seven of these tests rely entirely on

regression techniques to make comparisons across the two samples, without any need to

consider specific matched pairs.

The average market capitalizations for these 58 matched pairs of Nasdaq and

NYSE-listed stocks are shown below, broken down by category.

Market Capitalizations for Matched Pairs

Issuer Size Category

Very

Large Large Middle Small

Number of Pairs (58 total) 5 14 26 13

Market Capitalizations (millions)

Nasdaq stocks 50,115 3,330 447 144

NYSE stocks 45,349 3,434 501 169
iii

Results

The Report includes a variety of measures of order executions, including effective

spread, realized spread, quoted spread, speed of execution, and rate of execution. This

summary focuses on effective and realized spread for small market orders, and on speed

of execution for market orders.

The effective spread measures the execution cost paid by investors by comparing

the execution price to the midpoint of the NBBO quoted spread at the time that the order

arrived at the market center for execution. These cost differences are doubled in order to

make the effective spread statistics comparable to quoted spreads. For example, if a buy

order arrives when the spread midpoint is $20 per share and the buyer pays $20.125 per

share, the effective spread is (20.125 – 20) times 2, which equals $.25 per share.

The Report finds that, for market orders of 100-499 shares in the very large

category of matched Nasdaq and NYSE stocks, the average effective spreads are nearly

equal. (Although the first matched-pairs test for this category shows Nasdaq effective

spreads lower than NYSE effective spreads by 1.2 cents per share, this estimate is

statistically insignificant and the results are mixed across the range of the tests.) For 100-

499 share market orders in the large, middle and small categories, the first matched-pairs

test shows that the average Nasdaq effective spreads are from 5.7 to 11 cents per share

wider than those for the matched NYSE stocks. (These differences are statistically

significant and consistent across the range of tests).

The higher effective spreads for 100-499 share Nasdaq market orders, for all but

the very large stocks, arguably might be explained by more difficult order flow. In other

words, the dealers or other traders who are supplying liquidity on Nasdaq might be forced

to charge wider effective spreads to protect themselves against a high proportion of

informed trades included in the market orders. To test this possibility, we also examine

realized spreads. The realized spread is similar to the effective spread, except that it uses

the midpoint of the NBBO quoted spread five minutes after the order was executed. As

its name implies, the realized spread is a very short-term proxy for the potential profit

realized by the dealer or other trader taking the other side of the order. For market orders

of 100-499 shares, the Report finds that average realized spreads are nearly equal for the

very large matched Nasdaq and NYSE stocks. In the large, middle and small categories,

the average Nasdaq realized spreads for 100-499 share market orders are 6.8 to 14.6 cents

per share wider than those for the matched NYSE stocks. These results suggest that the

higher effective spreads on Nasdaq are not a result of more difficult order flow.
iv

The following table summarizes the results discussed above for 100-499 share

market orders, using the first test based on the 58 closest matches. Tables 6 and 9 in the

Report show that the other eleven tests produce substantially similar results.

Effective and Realized Spreads for 100-499 Share Market Orders

Issuer Size Category

Very Large Large Middle Small

 Dollar Effective Spreads

 Average Across Nasdaq Stocks 0.071 0.150 0.206 0.164

 Average Across NYSE Stocks 0.083 0.093 0.097 0.088

 Difference -0.012 0.057 ** 0.110 *** 0.076 *

 Dollar Realized Spreads

 Average Across Nasdaq Stocks 0.025 0.081 0.177 0.155

 Average Across NYSE Stocks 0.025 0.013 0.028 0.048

 Difference 0 0.068 ** 0.149 *** 0.107 ***

*,**, and *** denote statistical significance at the 10%, 5%, and 1% levels, respectively

To provide a comparison with the effective spreads paid by investors, the Report

also examines quoted spreads. In the very large category, the Report finds that quoted

spreads on Nasdaq stocks are on average 5.4 cents per share narrower than quoted

spreads for the matched NYSE stocks. Comparing quoted spreads to effective spreads

suggests that in Nasdaq stocks many orders are executed at the quotes, whereas many

orders sent to the NYSE are executed at better prices inside the quotes. The NYSE rules

require that the orders be given the opportunity to interact with other orders, which can

result in price improvement. In the large and small categories, quoted spreads are nearly

equal across the two markets, whereas the average Nasdaq quoted spreads are somewhat

wider in the middle category. As is the case for the very large stocks, the Nasdaq quoted

spreads for the other three categories are roughly equal to the effective spreads, whereas

the effective spreads for small market orders sent to the NYSE reflect substantial price

improvement.

NBBO Quoted Spreads

Issuer Size Category

Very Large Large Middle Small

 Average Across Nasdaq Stocks 0.079 0.149 0.211 0.154

 Average Across NYSE Stocks 0.133 0.148 0.157 0.138

 Difference -0.054 ** 0.001 0.053 ** 0.016

* and ** denote statistical significance at the 10% and 5% levels, respectively
v

The Report finds that market order executions are generally faster on Nasdaq than

on the NYSE for 100-499 share orders. The difference disappears for the 500-1999 share

market orders. Our results indicate that the NYSE executions tend to be somewhat faster

than the Nasdaq executions for 2000-4999 share market orders, but Nasdaq believes that

many large “not held” orders are not properly identified in their system. This miscoding

may reduce the accuracy of the comparison between the two markets for the largest

category of orders. The following Table shows the results for the first matched-pairs test.

As shown on Tables 19-21 of the Report, the other tests yield similar results.

Execution Times in Seconds

Issuer Size Category

Very Large Large Middle Small

100-499 Share Market Orders

 Average Across Nasdaq Stocks 3.4 6.0 7.8 4.5

 Average Across NYSE Stocks 17.1 15.8 26.5 15.8

 Difference -13.7 *** -9.8 *** -18.7 *** -11.3 ***

500-1999 Share Market Orders

 Average Across Nasdaq Stocks 17.3 24.0 25.0 16.8

 Average Across NYSE Stocks 20.6 17.4 27.9 20.6

 Difference -3.3 6.6 ** -2.9 -3.8

2000-4999 Share Market Orders

 Average Across Nasdaq Stocks 53.2 73.3 91.4 72.9

 Average Across NYSE Stocks 24.3 28.1 50.2 25.6

 Difference 29.0 * 45.2 *** 41.2 47.3 **

*,**, and *** denote statistical significance at the 10%, 5%, and 1% levels, respectively
1

Report on the Comparison of Order Executions Across Equity Market Structures

I. Introduction

The objective of this study of equity market trading is to examine differences in

order execution cost across different market structures. The study arises out of the

Commission’s extended inquiry into market fragmentation – the trading of investor

orders in multiple locations without interaction among those orders.1 In today’s markets,

investor order flow in the same security can be divided among many different “market

centers.” These different market centers can be broadly grouped into two market

structures – listed (NYSE and AMEX) and Nasdaq. The two market structures differ

significantly in the extent to which trading is fragmented among separate market centers.

Under the listed market structure, a substantial majority of trading in listed

securities (approximately 80% of share volume on the NYSE and 70% on Amex) is

consolidated in a single market center -- the primary exchange. The remaining 20-30%

of total listed share volume, consisting primarily of smaller size orders, is split widely

among the regional exchanges and “third market” market makers. The primary

exchanges generally operate agency auction markets that offer a substantial opportunity

for direct interaction among investor orders without the participation of a dealer.2

Dealers (specialists) participate in a relatively small percentage of trading on the primary

exchanges (26.8% of volume on the NYSE3).

Under the Nasdaq market structure, in contrast, no single market center accounts

for a majority of trading in Nasdaq securities. Instead, order flow during regular trading

hours is divided among many different market makers, eight ECNs, and a regional

exchange. In September 2000, for example, there were an average of 59 market makers

per issue in the top 1% of Nasdaq stocks by trading volume, 29 market makers per issue

in the next 9% of stocks, and an overall average of 13 market makers per issue. No

single market center of any type accounted for more than 15% of the total share volume

in Nasdaq securities. In addition, the majority of Nasdaq trading occurs primarily at

dealer market centers. The agency markets operated by the eight ECNs collectively

accounted for only 25.8% of Nasdaq share volume in September 2000.

In sum, the listed market structure is significantly less fragmented than the

Nasdaq market structure for two reasons. First, a significant majority of total trading in

listed securities occurs on a primary exchange. Second, the primary exchanges are

 

1

See Securities Exchange Act Release No. 42450 (February 23, 2000), 65 FR 10577

(“Fragmentation Concept Release”); Securities Exchange Act Release No. 43084 (July 28, 2000),

65 FR 48406 (proposing rules for disclosure of order routing and execution practices); Securities

Exchange Act Release No. 43590 (Nov. 17, 2000), 65 FR 75414 (adopting rules for disclosure of

order routing and execution practices).

2

Section 11A of the Securities Exchange Act of 1934 provides that an opportunity for investor

orders to be executed without the participation of a dealer is one of the five principal objectives for

the national market system.

3 Reflects June 2000. Provided by the NYSE.
2

predominantly agency markets in which investors’ orders interact directly. In contrast,

no single market center accounts for a majority of Nasdaq trading, and most of the

trading is done with dealers with relatively little interaction between customer orders.

One of the most important concerns prompting the Commission’s inquiry into

fragmentation was the potential for increased fragmentation of trading in exchange-listed

equities, particularly due to dealer practices such as internalization and payment for order

flow.4 This study compares trading in securities with a single, dominant market center

with a high degree of order interaction (the NYSE)5 with trading in securities in a market

structure that is divided among many different market centers (all market centers trading

Nasdaq securities). This analysis is intended to shed light on how these different market

structures affect the execution of customer orders.

II. Background

As shown in Appendix A, several academic studies have examined execution cost

differences between the NYSE and the Nasdaq. For the most part, these studies have

focused on effective spread, 6 rather than quoted spread because the effective spread

reflects prices actually paid or received by customers. Broadly speaking, these studies

concluded that the NYSE had significantly lower effective spreads than the Nasdaq prior

to the implementation of the Order Handling Rules. After the implementation of the

rules, the results of the comparison are more mixed, but the studies generally seem to

indicate effective spreads on the NYSE are still somewhat lower than on Nasdaq.

Virtually all of these studies are based on trade data rather than order data, so they are

unable to determine the direction of each incoming order,7 and they are unable to

determine the time that each order arrived. Together, these two problems can lead to

serious bias in calculating effective spreads. 8

 

4

See Fragmentation Concept Release, note 1 above.

5 To highlight the potential market structure effects of order interaction versus fragmentation, only

NYSE trading in listed securities is examined. The Commission’s staff previously has examined

the extent to which execution cost can vary across different market centers trading listed

securities. Report on the Practice of Preferencing (April 11, 1997).

6

For buy orders, effective spread equals twice the amount that the trade price is above quote

midpoint. For sell orders, effective spread equals twice the amount the trade price is below the

quote midpoint. Thus, if all buy orders paid the ask and all sell orders received the bid, then the

effective spread would be the same as the quoted spread. When some orders receive price

improvement, the average effective spread is less than the average quoted spread.

7 Direction of the order means whether the order is to buy or sell shares.

8

Ideally, the effective spread measures the signed difference between the execution price and the

midpoint of the NBBO at the time the order arrived. Studies that have access to only quotes and

execution reports are forced to use the quote at the time of the execution report and to infer the

direction of the order by comparing the execution price to the quote midpoint. This causes the

following errors in inference: 1)The quotes may have moved between the arrival and execution of

the order, and 2) buy and sell orders that execute on the other side of the midpoint are assigned an

effective spread estimate that has the wrong sign. With unreliable time stamps on the execution

reports, the problems above are greatly exacerbated. To understand the kind of problem that can
3

The lack of order data also means that the previous studies are unable to

distinguish trades that resulted from market orders from those that resulted from limit

orders, and that they may not accurately measure execution performance for different

order sizes when orders are broken up into multiple trades. Further, existing studies are

unable to distinguish trades resulting from customer orders from trades between dealers.

In contrast, the databases used in this study (described below) allow us to focus on the

execution performance of customer orders, by order type and size, excluding all trading

between dealers. In addition, since we excluded “Not Held” orders, we are eliminating

many trades from institutional customers and focusing primarily on retail customer

orders.

Most of the analysis contained in this report uses the same order size categories

and definitions of statistical measures contained in the recently adopted execution quality

disclosure rule.9 Accordingly, independent observers will be able to conduct their own

comparisons between Nasdaq and NYSE execution cost measures once these statistics

become available. The data in the report will provide a useful benchmark reflecting the

period prior to the adoption of the rule.

III. Data for the study

A. Sample of stocks

The process for selecting stocks began with all of the US common stocks with

share price information in the University of Chicago’s Center for Research in Securities

Prices (CRSP) database as of December 31, 1999. We then eliminated stocks that did not

have return data beginning December 31, 1997 and all stocks with no information

available from the Standard and Poors COMPUSTAT database. We then used the

reported intraday volumes and prices from the databases obtained from Securities

Industry Automation Corporation (SIAC) and applied several filters to ensure data

availability. Finally, we selected a subsample of 200 Nasdaq stocks by sorting our list of

1644 Nasdaq stocks that passed all of the filters by dollar trading volume during January

2000, and then selecting every 8th stock from this list.

These filters were originally designed under the assumption that we would obtain

data for the 3-month period from February through April of 2000. It turned out, however,

that a sample of this size was difficult to obtain from the NASD. In addition, the data

files (particularly the NASD audit files) for such a long period would have been very

 

arise, imagine accidentally comparing the trades of Qualcomm on Thursday, May 11 (when the

stock traded between $96 and $101) to the quotes for Monday, May 8 (when the stock traded

between $103 and $107). The standard methodology for calculating effective spreads would sign

all of the May 11 trades as sell orders because the highest trade price of $101 is still below the

lowest May 8 quote midpoint. The effective spread for these presumed sell orders is would be the

reference quote midpoint minus the trade price, which would be at least $2 and could be as high as

$11 based on the price ranges for these two days. Interestingly, just knowing the direction of each

order would eliminate the bias in this example provided there were about as many buy and sell

orders, although you would still be left with very noisy estimates.

9 Rule 11Ac1-5.
4

large and slow to process. After discussions with the NASD, the June 5-9 period was

selected. Data were available from this period for all but one of the 200-stock subsample

described above, leaving us with a subsample of 199 Nasdaq stocks.

In spite of the fact that data filters described above tended to bias this 199-stock

subsample toward the larger issuers,10 Nasdaq management strongly insisted on full

representation of the very largest stocks in the sample. Accordingly, they subsequently

transmitted data to the SEC for 31 Nasdaq stocks, which were selected because they were

either in the top 20 based on June 2000 dollar trading volume, or in the top 20 based on

June 30, 2000 market capitalization, or in the top 20 based on June 2000 share trading

volume.11 Of these 31, three were already included in the previous 199-stock subsample,

and 6 did not pass the data filters that were applied to both the Nasdaq and NYSE stocks.

Thus, there are 221 stocks in the final Nasdaq sample.

Table 1 summarizes the procedures and filters used to generate the Nasdaq

sample. The selection procedure includes several filters to ensure data availability.

Appendix B compares the cumulative distributions of share prices and market

capitalization, and weekly volatilities for the stocks in our sample as compared to all of

the National Market stocks on Nasdaq as of December 31, 1999. Table 2 shows the

result of applying the same data filters to NYSE-listed US common stocks, yielding a

pool of 1141 stocks. We obtained order and execution price data for all of these stocks

from the NYSE.

B. Data Sources

From Nasdaq we received all of the OATS data for our sample of 221 stocks

covering the period from June 5-June 9 of 2000. From the NYSE, we received the entire

SOD file for that time period and we extracted the data for all 1141 stocks. At this time,

we do not have order data from other exchanges or the Nasdaq Intermarket for these

NYSE-listed issues. Both the SOD and OATS files capture a large portion of the retail

orders and a smaller portion of the institutional orders.

As specified by NASD rule 6951, the OATS data contain all electronic orders12 in

Nasdaq stocks “other than any instruction to effect a proprietary transaction originated by

a trading desk.” This exclusion only applies to proprietary orders sent from one brokerdealer to another; proprietary orders sent to an ECN are entered into the OATS database

by the ECN. Although we consider orders sent to all of the Nasdaq market centers, we

only examine the orders in NYSE-listed stocks that were routed to the NYSE and

captured in the SOD file. The SOD file includes all orders transmitted to the NYSE

 

10 The 199-stock sample included six stocks from the Nasdaq 100: Apple, American Power

Conversion, Comverse Technology, 3-COM, S D L Inc., and Worldcom.

11 Throughout this report, we define market capitalization based on the June 9, 2000 value. Using

this definition, there are four stocks that were in the top 20, but were not included in the Nasdaq

sample: ADC Telecommunications, Altera, Adobe Systems, and XILINX.

12 Orders received verbally and over the phone were included as part of “Phase 3”, which had not yet

begun as of our June 5-9 sample period.
5

specialist’s post via the SuperDOT system, along with execution and contra party

information. Market makers in NYSE-listed stocks sometimes use the SuperDOT system

to submit orders to the NYSE floor, and we are unable to separate these orders from those

of other customers.

We exclude from the analysis orders for which the customer requested special

handling.13 We also exclude orders entered before 9:30 EST, orders entered after 4:00

EST and orders that do not execute by 4:00 EST on the day they are entered.14 The orders

in our OATS sample account for about 70% of reported Nasdaq trades and about 50% of

reported Nasdaq share volume for the 221 stocks in our sample for June 5-9. The orders

in our SOD sample account for 93% of reported NYSE trades and 47% of reported

NYSE share volume for the same period.

NYSE execution prices are included in the SOD data. The OATS data include

neither execution prices nor contra party information, nor do they include information

regarding the disposition of SelectNet-routed orders. To ascertain execution prices and

contra party information, we matched the OATS data with Nasdaq audit trail data (the

ACT file). Because of formatting and other problems, this matching required a multistep process that is described in Appendix C. Through this process, we ultimately

matched 97.8% of market order executions and 92.7% of limit order executions. We also

matched OATS orders that were routed to SelectNet to data from the SelectNet system,

and we were able to match 74.3% of these order routings. Details of the SelectNet

matching procedures are also included in Appendix C.

To check for clearly erroneous trade prices, we individually examined all trades

that resulted in more than a 10% effective spread on the executed portion of an order. As

a result of our review, we eliminated a total of 7 orders in NYSE stocks out of a total of

nearly 7 million orders. Our review of the Nasdaq execution prices did not yield any

cases that were clearly erroneous.

C. Matching of Nasdaq stocks to NYSE stocks

We are trying to isolate the differences in execution costs associated with

different levels of fragmentation, so it is important to control for the fact that Nasdaq

stocks and NYSE-listed stocks tend to differ along several dimensions. We use two

complementary strategies to accomplish this goal: 1) we form “matched pairs” of similar

stocks from each market, and 2) we use regression techniques. In some tests the

regressions are used in combinations with the matched pairs to control for the differences

 

13 Types of orders specifically excluded are: orders to be executed at a market opening or closing

price; stop and stop limit orders; short sales and other orders that must be executed on a particular

tick or bid; orders submitted on a "not held" basis, all-or-none, minimum quantity or fill or kill

orders; work orders; peg orders; orders required to be broken up and executed over the course of

the day; scale orders; orders that are part of a program trade or arbitrage strategy; proprietary

orders; orders marked do not reduce and/or do not increase; orders having a reserve size; orders to

be executed after the close; odd-lot orders; and CAP orders.

14 The one exception is that the adjusted spread measure for marketable limit orders (described

below) includes orders that do not execute by 4:00 EST.
6

that remain after the matching, and in other tests we use only the regression techniques so

that we can use all of the stocks in our samples. In all of the matched pair and regression

tests we control for differences in

• share price (6/9/00 closing price)

• historical weekly volatility (standard deviation of weekly returns from

12/31/97 through 6/9/00),15

• market capitalization (Based on June 9, 2000 share price. Nasdaq provided

June 5, 2000 shares outstanding for all of their issues. For the NYSElisted issues, we use shares outstanding as of 12/31/99 adjusted for splits)

• adjusted16 consolidated dollar trading volume (for June 5-9).

In addition, in the regressions we consider:

• an “indicator” of whether the stock passes the NYSE’s initial listing

requirements

• 2-digit SIC code

• P/E ratio (the four quarters of pre-tax earnings through the first quarter of

2000, divided by the market capitalization described above)

The matching procedure cycles through all of the Nasdaq stocks alphabetically by

ticker symbol. The objectives are: 1) to create pairs of stocks that are similar to each

other and, 2) to create the pairs in such a way that there is no tendency for the stocks in

one market to differ systematically from those in the other market. Of course if the first

objective could be perfectly achieved, the second would follow automatically.

Unfortunately, no two stocks are identical in all characteristics. Our matching algorithm

calculates the total percentage difference between the factors for the Nasdaq stock under

consideration and the factors for a candidate NYSE stock as follows (|x| denotes the

absolute value of x, so for example, |0.1|=0.1 and |-0.15|=0.15):

 

15 This period contains 123 weeks. We also use the standard deviation over the 51 weeks from June

1999 through June 2000 as an alternative control variable in our regressions in Section IV.

16 We examined 82 US common stocks that moved from the Nasdaq to the NYSE between July 1998

and August 2000. For each event, we first adjusted for stock splits and then computed average

volume for two 3-month (63 trading day) windows before and after the move, excluding the 15

trading days centered on the move. To adjust for changes in the overall level of volume over the

event, we divided both the pre- and post-move share volumes by the average composite volume

for all NYSE-listed securities during the respective periods. We then calculated the ratio of the

post-move (NYSE composite) statistic to the pre-move (Nasdaq) statistic. The average of this

ratio across the stocks in our sample was 0.70. Accordingly, we use this factor (70%) to adjust the

dollar volumes for our Nasdaq issues, in order to make them comparable to the (unadjusted)

consolidated volumes for our NYSE-listed issues.
7

Total percentage difference =

[ | Nasdaq market capitalization

NYSE market capitalization - 1.0 | + |

Nasdaq share price

NYSE share price - 1.0 | +

|

Nasdaq adjusted volume

NYSE adjusted volume - 1.0 | + |

Nasdaq volatility

NYSE volatility - 0.9 5 | ] x 100%

For each Nasdaq stocks, the best-matched NYSE stock is the one that minimizes the

above total percentage difference.

As illustrated in Appendix B, the Nasdaq stocks as a whole and in our sample

have considerably higher volatilities than those in the NYSE. Simply choosing the

NYSE stock with the closest volatility produces matched pairs where the NYSE stocks

have lower average volatility. To compensate for this tendency, we use the factor .95 for

volatility, as opposed to 1.0 (no adjustment) for the other measures. This factor of .95 is

chosen by so that we obtain a reasonably large subsample of closest matched pairs that

does not have any significant average difference between the Nasdaq and NYSE

volatility. While the specific adjustment is based on trial and error, the important thing is

that this search proceeds without consideration of the end results; the execution cost

measures are only calculated after the matching algorithm is completed. Once the best

NYSE stock is found and matched to the Nasdaq stock, the NYSE stock is removed from

the set of potential matches and the procedure begins again for the next Nasdaq stock.

Panel A Table 3 shows statistics for the full sample of 221 matched pairs. In spite

of the attempt to provide close matches as described above, these statistics show

substantial differences between the Nasdaq and the NYSE firms. Panel B shows the

statistics for the subset of 58 matched pairs where the total matching criterion described

above is less than 70% (on average less than 17.5% difference for each criterion). In this

smaller set, the average pair-wise differences in prices, volatilities, and market

capitalizations are reasonably close to zero. The adjusted volumes for the Nasdaq stocks

are somewhat higher.17 The execution cost results for both the subset of 58 pairs of

stocks and the full set of 221 pairs of stocks are examined in Section IV.

The stocks in the subset of close matches concentrate in the relatively larger and

more liquid stocks in our sample. Appendix B provides graphical comparisons of price,

market capitalization and volatility for Nasdaq and NYSE firms and compares these

measures for the various subsamples discussed above.

 

17 As shown in Table 5, this difference in average trading volume is confined to the pairs in the very

large category.
8

D. Definitions of the Very Large, Large, Middle and Small Categories

In examining the execution cost statistics for the 58 and 221 pairs of stocks in

Section IV, we analyze the differences separately for four categories based on the Nasdaq

stock in the pair. The first category, which we refer to as “very large,” contains the pairs

for which the Nasdaq stock was specifically identified by Nasdaq management for

inclusion in the Report. The remaining other stocks from our original random sample are

placed into three categories based on market capitalization: 1) over $1 billion, 2) from

$200 million to $1 billion and 3) below $200 million. For the remainder of the Report,

we refer to these three categories as “Large,” “Middle,” and “Small.” The table below

shows the breakdown of the 221 pairs and the 58 closest matched pairs.18 The number of

cases where the Nasdaq stock in the pair passes NYSE listing requirements during our

sample period is shown in parenthesis. 19

Size Category

Very

Large Large Middle Small

221 pairs

-Pairs in category

-Nasdaq stock passes NYSE

listing requirements

25

(25)

33

(22)

72

(29)

91

(11)

58 closest matched pairs

-Pairs in category

-Nasdaq stock passes NYSE

listing requirements

5

(5)

14

(12)

26

(17)

13

(4)

Tables 4 and 5 show how the market capitalization, price, adjusted volume, and volatility

statistics vary across each of the three categories. The pairs of stocks are listed in

Appendix F.

E. Definitions of Statistics

We examine the same measures and size categories contained in the execution

quality disclosure rule. For the comparison of the Nasdaq and NYSE markets, we also

calculate order-weighted average quoted spreads and an adjusted spread measure for

marketable limit orders. The adjusted spread is similar to those used by Harris and

Hasbrouck 20 and Handa and Schwartz 21. The advantage of the measure is that it

 

18 Appendix D shows counts of executed orders for both the NYSE and Nasdaq stocks in our 221

pairs.

19 Appendix E summarizes the NYSE listing requirements. Note that there are much lower standards

to avoid delisting. Accordingly, some of our 1141 NYSE-listed stocks did not meet these NYSE

listing requirements as of June 5.

20 Harris, L. and J. Hasbrouck, 1996, "Market vs. Limit Orders: The SuperDOT Evidence on Order

Submission Strategy," Journal of Financial and Quantitative Analysis, 31, 213-232.

21 Handa, P. and R. Schwartz, 1996, "Limit Order Trading," Journal of Finance, 51, 1835-1862.
9

captures the adverse selection costs associated with the instances where the limit order

trader “misses” the market. For executed orders, this adjusted spread measure is the same

as the effective spread measure for market orders in that it compares the spread midpoint

at the time the order was submitted to the execution price. For unexecuted marketable

limit orders (or the unexecuted portion of an order), the adjusted spread measure imputes

an execution price. For a buy order, this imputed price is equal to the NBBO ask quote at

the time of cancellation or expiration of the order less the average price improvement for

market orders for that stock of that size.22 The calculation for sell orders is analogous.

As with market order effective spreads, the values reported for the adjusted spread

measure are double the calculated amount, which makes them comparable to the quoted

spread. Because of this doubling, the reported values should be interpreted as the

estimated cost for a round-trip transaction.

Because the adjusted spread measure includes an imputed execution price based

on a hypothetical market order, it is strictly appropriate only for traders who are fully

committed to execution. Accordingly, we compare the measure across the two markets

only for marketable limit orders.23 Although traders sometimes use other types of limit

orders and then follow up with market orders, we do not report the adjusted spread

measure for the other types of limit orders because the limit order strategies across the

two markets are so different. For example, in the Nasdaq market it is common for traders

to place multiple orders in different market centers, each representing their entire desired

trade. When one of these executes the others are quickly cancelled. This strategy is not

as prevalent in the listed market.24 When this strategy is followed successfully and the

trader cancels the other limit orders, the adjusted spread measure would impute market

order effective spread costs for all of these cancelled orders.

 

22 We use the number of unexecuted shares to determine the size category and then use the average

price improvement for market orders in that stock and size category. There are a total of 147

marketable limit orders in a total of 44 Nasdaq stocks where the cancelled/expired portion of the

order is in a size category for which there are no market orders for that stock. In these cases, we

estimate price improvement to be –3.99 cents, -9.86 cents and –11.80 cents for orders in the 500-

1999 share, 2000-4999 share and 5000+ share categories. There are a total of 146 marketable

limit orders in a total of 77 NYSE stocks where the cancelled/expired portion of the order is in a

size category for which there are no market orders for that stock. In these cases, we estimate price

improvement to be +2.59 cents, -0.75 cents and –4.86 cents for orders in the 500-1999 share,

2000-4999 share and 5000+ share categories. These are the averages for market orders of these

sizes across all of the NYSE stocks in our sample.

23 On the Nasdaq, some traders submit and cancel marketable limit orders extremely rapidly,

sometimes in less than one second. Usually, these orders are part of a two-part strategy, where the

marketable limit order is “fishing “ for a hidden order on an ECN. If the hidden order is there,

then the incoming marketable limit will execute, often with price improvement. If the order does

not immediately execute, it is cancelled and generally followed up with a market order. The

adjusted spread measure correctly captures the full cost of this strategy, whereas any measure

based solely on executed orders would underestimate the cost.

24 There may be two reasons why this strategy is not as prevalent in the listed market. First, in the

listed market it is more difficult to cancel orders quickly, so the trader runs the risk of trading

more than the desired number of shares. The second reason may be that execution of an order sent

to a single venue is more likely, either because of higher consolidation of order flow (if the order

is sent to the NYSE) or to “print protection” (if the order is sent to a regional exchange).
10

IV. Comparison of Nasdaq Execution Costs to NYSE Execution Costs

A. Statistical Methods

In this section, we compare the NYSE and Nasdaq based on a variety of measures

and order size categories. Each calculation is done separately for the four categories

described above: very large, large, middle and small. For each of these categories, we

estimate the difference between the Nasdaq and NYSE stocks using twelve different

statistical tests, two that use the matched pairs exclusively, three that add regression

controls to the matched pairs, and seven that use regressions and allow all of the stocks to

be included.25

The first test uses the sample of 58 closest matched pairs of Nasdaq and NYSE

stocks described in section III.C. For each stock in the pair, we use the share-weighted

average of the measure across all of the orders of that type and size category.26 We

calculate the difference across each pair and report the average of these differences.

Statistical significance is judged by applying the standard t-test to these pair-wise

differences. The second test is similar to the first, except we use all of the 221 pairs of

stocks.

The third, fourth, and fifth tests continue with the 221 pairs of stocks but

introduce regression techniques to control for differences in share price, weekly

volatility, market capitalization, dollar trading volume, and whether the Nasdaq stock

and/or the NYSE stock in the pair passes the NYSE’s initial listing requirements. To

allow rigorous descriptions of these regressions, we introduce the following notation: (in

all cases differences are the Nasdaq value minus the NYSE value)

j = index to pairs of stocks

Xj = Difference in the average execution cost statistic for pair j

Mj = Difference in the natural logarithms of the market capitalization for pair j

Pj = Difference in the reciprocals of share price for pair j

Dj = Difference in the natural logarithms of weekly dollar trading volume for pair j

VLj = Difference in the weekly volatilities for pair j, estimated using 123 weeks

from December 1997 through June of 2000 (used in tests 3 and 5)

VSj = Difference in the weekly volatilities for pair j, estimated using 51 weeks

from June 1999 through June of 2000 (used in test 4)

QNLj = Indicator variable equal to one if the Nasdaq stock in pair j does not pass the

NYSE initial listing requirements and the NYSE stock does pass, equal to

 

25 We exclude a pair from tests 1-5 if there are fewer than five orders (over the week) of the size and

type under consideration, for either of the stocks in the pair. Similarly, we exclude a stock from

tests 6-11 if there are fewer than 5 orders (over the week) of the size and type under

consideration.

26 Except in the case of quoted spread, where we measure the quoted spread in effect at the time of

arrival of each market order and then average across the market orders in all size categories for the

stock.
11

zero if either both pass or both don’t pass, and equal to -1 if the Nasdaq

stock passes and the NYSE stock does not pass.

The regressions for the third, fourth and fifth tests are as follows:

Xj = bQ + bM Mj + bP Pj + bD Dj + bV VLj + εj (test 3)

Xj = bQ + bM Mj + bP Pj + bD Dj + bV VSj + εj (test 4)

Xj = bQ + bM Mj + bP Pj + bD Dj + bV VLj + bL QNLj + εj (test 5)

The estimated intercept bQ is the estimated difference between the NYSE and

Nasdaq statistics after controlling for differences in share price, weekly volatility, market

capitalization, and dollar trading volume (and in test 5 conditioning on the Nasdaq stock

passing the NYSE listing requirements). The statistical significance of this estimate is

calculated using White’s non-parametric correction to allow for the heteroscedasticity in

the εj’s.

The remaining seven tests depart from the pairwise comparisons to allow us to

use all of the information in the 1141 NYSE stocks. We still perform these tests

separately for each of the four size categories of Nasdaq stocks. For a NYSE stock to be

included in a particular test for a particular category, its price, market capitalization,

volume and volatility each must lie between the minimum and maximum across the

Nasdaq stocks in the category.

Tests six through ten continue to use the averages for the stock across the order

size and order type under consideration. To describe these tests, we use the following

notation:

j = index to individual stocks

Xj = Average execution cost statistic for stock j

IQj = an indicator variable that takes the value one if stock j is a Nasdaq stock and

zero otherwise

Mj = Natural logarithm of the market capitalization for stock j

Pj = Reciprocal of share price for stock j

Dj = Natural logarithm of weekly dollar trading volume for stock j

VLj = Weekly volatility for stock j, estimated using 123 weeks from December

1997 through June of 2000

VSj = Weekly volatility for stock j, estimated using 51 weeks from June 1999

through June of 2000

PE+

j = Natural logarithm of the price-earnings ratio27 if this ratio is positive, zero

otherwise

 

27 The price earnings ratio is calculated by dividing the June 9 market capitalization by the sum of

pre-tax income over the period from the second quarter of 1999 through the first quarter of 2000.
12

PEj = Natural logarithm of the absolute value of the price-earnings ratio if this

ratio is negative, zero otherwise

ISICj,k = Indicator variable equal to one if the two-digit primary SIC code for stock j

is equal to k, zero otherwise

INLj = Indicator variable equal to one if stock j does not pass the NYSE initial

listing requirements, and equal to zero if it passes.

INPEj = Indicator variable equal to one if the price-earnings ratio is negative, zero

otherwise

The regressions for tests 6-10 are as follows:

Xj = α + bQ IQj + bM Mj + bP Pj + bD Dj + bV VLj + εj (test 6)

Xj = α + bQ IQj + bM Mj + bP Pj + bD Dj + bV VSj + εj (test 7)

Xj = bQ IQj + bM Mj + bP Pj + bD Dj + bV VLj + ∑

k=0

99

bS,k ISICj,k + εj (test 8)28

Xj = α + bQ IQj + bM Mj + bP Pj + bD Dj + bV VLj + bL INLj + εj (test 9)

Xj = α + bQ IQj + bM Mj + bP Pj + bD Dj + bV VLj

+ b+ PE+

j

 + b- PEj

 + bN INPEj + εj (test 10)

The estimated coefficient bQ is the estimated difference between the Nasdaq and

NYSE statistics after controlling for differences in share price, weekly volatility, market

capitalization, and dollar trading volume (plus primary SIC code in the case of test 8, plus

NYSE listing criteria in test 9, and plus price-earnings ration in test 10). The statistical

significance of this estimate is again calculated using White’s non-parametric correction

to allow for the heteroscedasticity in the εj’s.

The eleventh test allows the slope coefficients bM, bP, bD, and bV for the Nasdaq

stocks to differ from those of the NYSE stocks. In this test we redefine Mj, Pj, Dj, and

VLj to be equal to the value of the statistic for stock j less the mean of this statistic across

all of the Nasdaq stocks in the category.

29 We continue with the same definition of the

indicator variable IQj. With these new definitions the regression for test 11 is as follows:

Xj = α + bQ IQj + bM Mj + bP Pj + bD Dj + bV VLj +

 + bM,QIQj Mj + bP,QIQj Pj + bD,QIQj Dj + bV,QIQj VLj + εj (test 11)

 

28 There is no separate constant term in the regression for test 8 because the SIC dummy variables

sum to a column of ones.

29 The subtracting of a constant from each of the independent variables in the regression does not

change the estimated slope coefficients, or the fit of the regression. Rather, it changes the values

and interpretation of the intercept terms. In this case, the subtraction is necessary to allow the

appropriate interpretation of bQ.
13

In this case, the estimated coefficient bQ is the estimated difference between the Nasdaq

and NYSE statistics for a firm whose share price, weekly volatility, market capitalization,

and dollar trading volume are all equal to the means of values for the Nasdaq stocks in

the category.

The twelfth and final test allows us to use all of the information in the individual

orders for each stock to improve the efficiency of our estimates. The notation is similar

to that for test six above, except now there is a t subscript on the execution cost statistic

as well as the error term. This notation is given in full below:

j = index to individual stocks

t = index to orders for each stock

Xj,t = Execution cost statistic for order t of stock j

IQj = an indicator variable that takes the value one if stock j is a Nasdaq stock and

zero otherwise

Mj = Natural logarithm of the market capitalization for stock j

Pj = Reciprocal of share price for stock j

Dj = Natural logarithm of weekly dollar trading volume for stock j

Vj = Weekly volatility for stock j

The regression for test 12 takes the form:

Xj,t = α + bQ IQj + bM Mj + bP Pj + bD Dj + bV Vj + υj,t (test 12)

where the error term allows for a single security wide error due to potentially omitted

factors as follows:

υj,t = μj + εj,t

where μj and εj,t are normally distributed with zero means and unknown standard

deviations of σμ and σε , respectively.

The regressions described above are estimated using feasible generalized least

squares. The estimated coefficient bQ is the estimated difference between the Nasdaq

and NYSE statistics after controlling for differences in share price, weekly volatility,

market capitalization, and dollar trading volume. The statistical significance of this

estimate is again calculated using White’s non-parametric correction to allow for the

heteroscedasticity in both the μ’s and the ε’s.30

 

30 The regressions were estimated using SAS’s PROC MIXED with method=REML and the

EMPIRICAL option to produce a heteroscedasticity-consistent p-value.
14

B. Results For Execution Costs

The detailed results of our tests are shown in Tables 6-30. For the most part, the

results from test 1 are quite similar to those from tests 2-12. Accordingly, in this section

we focus on the results for the first test, which uses the closest matches.

We begin the investigation of execution cost by focusing on effective spreads for

market orders. The effective spread measures the execution cost paid by investors by

comparing the execution price to the midpoint of the NBBO quoted spread at the time

that the order arrived at the market center for execution. These cost differences are

doubled in order to make the effective spread statistics comparable to quoted spreads.

For example, if a buy order arrives when the spread midpoint is $20 per share and the

buyer pays $20.125 per share, the effective spread is (20.125 – 20) times 2, which equals

$.25 per share.

The effective spread results for the three different market order sizes are shown in

Tables 6, 7, and 8. The results of the first matched-pairs test from each of these tables are

reproduced below. For market orders of 100-499 shares in the very large category, the

table shows that Nasdaq effective spreads are lower than NYSE effective spreads by 1.2

cents per share, however, this estimate is statistically insignificant and the results are

mixed across the range of the tests. For 100-499 share market orders in the large, middle

and small categories, the first matched-pair test shows that the average Nasdaq effective

spreads are from 5.7 to 11 cents per share wider than those for the matched NYSE stocks.

These differences are statistically significant and consistent across the range of tests.

Effective Spreads by Issuer Size Category

Very Large Large Middle Small

100-499 Share Market Orders

 Average Across Nasdaq Stocks 0.071 0.150 0.206 0.164

 Average Across NYSE Stocks 0.083 0.093 0.097 0.088

 Difference -0.012 0.057 ** 0.110 *** 0.076 *

500-1999 Share Market Orders

 Average Across Nasdaq Stocks 0.086 0.168 0.276 0.131

 Average Across NYSE Stocks 0.117 0.142 0.139 0.097

 Difference -0.031 0.026 0.136 ** 0.034

2000-4999 Share Market Orders

 Average Across Nasdaq Stocks 0.142 0.244 0.299 0.176

 Average Across NYSE Stocks 0.184 0.190 0.144 0.117

 Difference -0.041 0.055 0.154 ** 0.059

*,**, and *** denote statistical significance at the 10%, 5%, and 1% levels, respectively

The generally higher effective spreads for Nasdaq market orders, for all but the

very large stocks, arguably might be explained by more difficult order flow. In other

words, the dealers or other traders who are supplying liquidity on Nasdaq might be forced

to charge wider effective spreads to protect themselves against a high proportion of

informed trades included in the market orders. To test this possibility, we also examine

realized spreads. The realized spread is similar to the effective spread, except that it uses
15

the midpoint of the NBBO quoted spread five minutes after the order was executed. As

its name implies, the realized spread is a very short-term proxy for the potential profit

realized by the dealer or other trader taking the other side of the order.

The realized spread results for the three different market order sizes are shown in

Tables 9, 10, and 11. The results of the first test from each of these tables are reproduced

below. These results suggest that the higher effective spreads on Nasdaq for all but the

very large category are not a result of more difficult order flow.

Realized Spreads by Issuer Size Category

Very Large Large Middle Small

100-499 Share Market Orders

 Average Across Nasdaq Stocks 0.025 0.081 0.177 0.155

 Average Across NYSE Stocks 0.025 0.013 0.028 0.048

 Difference 0.000 0.068 ** 0.149 *** 0.107 ***

500-1999 Share Market Orders

 Average Across Nasdaq Stocks 0.046 0.058 0.095 0.087

 Average Across NYSE Stocks 0.015 0.009 0.011 0.037

 Difference 0.030 * 0.050 *** 0.084 *** 0.051 *

2000-4999 Share Market Orders

 Average Across Nasdaq Stocks 0.055 0.112 0.208 0.128

 Average Across NYSE Stocks 0.032 0.032 -0.050 0.033

 Difference 0.024 0.080 0.258 * 0.095 *

*,**, and *** denote statistical significance at the 10%, 5%, and 1% levels, respectively

To provide a comparison with the effective spreads paid by investors, the Report

also examines quoted spreads. For each stock, the statistic is calculated by measuring the

NBBO quoted spread at the time of arrival of each market order, and then averaging

across all market orders. In the very large category, the Report finds that quoted spreads

on Nasdaq are on average 5.4 cents per share narrower than quoted spreads for the

matched NYSE stocks. Comparing quoted spreads to effective spreads suggests that in

Nasdaq stocks many orders are executed at the quotes, whereas many orders sent to the

NYSE are executed at better prices inside the quotes. The NYSE rules require that the

orders be given the opportunity to interact with other orders, which can result in price

improvement. In the large and small categories, quoted spreads are nearly equal across

the two markets, whereas the average Nasdaq quoted spreads are somewhat wider in the

middle category. As is the case for the very large stocks, the Nasdaq quoted spreads for

the other three categories are roughly equal to the effective spreads, whereas the effective

spreads for small market orders sent to the NYSE reflect substantial price improvement.
16

NBBO Quoted Spreads by Issuer Size Category

Very Large Large Middle Small

 Average Across Nasdaq Stocks 0.079 0.149 0.211 0.154

 Average Across NYSE Stocks 0.133 0.148 0.157 0.138

 Difference -0.054 ** 0.001 0.053 ** 0.016

* and ** denote statistical significance at the 10% and 5% levels, respectively

Although there tends to be little price improvement for market orders sent to

Nasdaq dealer market centers, there can be price improvement for marketable limit orders

sent to ECN’s if there is an undisplayed order inside the ECN. Accordingly, many

traders in Nasdaq stocks use the strategy of first submitting a marketable limit order and

then following up with a market order if the marketable limit order fails to execute. Our

adjusted spread measure is designed with this strategy in mind. It is important to note

however, that not all unexecuted marketable limit orders are followed by a market order.

In these cases, the failure to execute is still costly to the trader, but it is unclear whether

the implicit cost estimate included in the adjusted spread measure is appropriate.31

The adjusted spread results for marketable limit orders in the three different size

categories are shown in tables 13, 14 and 15. The results of the first test from each of

these tables are reproduced below.

Adjusted Spreads by Issuer Size Category

Very Large Large Middle Small

100-499 Share Marketable Limit Orders

 Average Across Nasdaq Stocks 0.080 0.168 0.193 0.183

 Average Across NYSE Stocks 0.087 0.102 0.114 0.093

 Difference -0.007 0.067 ** 0.079 *** 0.090

500-1999 Share Marketable Limit Orders

 Average Across Nasdaq Stocks 0.092 0.175 0.225 0.161

 Average Across NYSE Stocks 0.124 0.167 0.150 0.123

 Difference -0.031 0.008 0.075 ** 0.038

2000-4999 Share Marketable Limit Orders

 Average Across Nasdaq Stocks 0.123 0.229 0.273 0.414

 Average Across NYSE Stocks 0.170 0.188 0.196 0.188

 Difference -0.046 0.041 0.076 0.226

*,**, and *** denote statistical significance at the 10%, 5%, and 1% levels, respectively

C. Time to Execution and Fill Rates

The Report finds that market order executions are generally faster on Nasdaq than

on the NYSE for 100-499 share orders. The difference disappears for the 500-1999 share

 

31 As discussed in Section III.E., the problem of assigning a cost for unexecuted orders becomes

even more acute for non-marketable limit orders, because the strategies used differ substantially

across the two market structures. Accordingly, we have not included the adjusted and realized

spread results for the non-marketable limit orders in this report.
17

market orders. Our results indicate that the NYSE executions tend to be somewhat faster

than the Nasdaq executions for 2000-4999 share market orders, but Nasdaq believes that

many large “not held” orders are not properly identified in their system. This miscoding

may reduce the accuracy of the comparison between the two markets for the largest

category of orders. The following Table shows the results for the 58 closest matched

pairs. As shown on Tables 19-21, the other tests yield similar results.32

Execution times in Seconds by Issuer Size Category

Very Large Large Middle Small

100-499 Share Market Orders

 Average Across Nasdaq Stocks 3.4 6.0 7.8 4.5

 Average Across NYSE Stocks 17.1 15.8 26.5 15.8

 Difference -13.7 *** -9.8 *** -18.7 *** -11.3 ***

500-1999 Share Market Orders

 Average Across Nasdaq Stocks 17.3 24.0 25.0 16.8

 Average Across NYSE Stocks 20.6 17.4 27.9 20.6

 Difference -3.3 6.6 ** -2.9 -3.8

2000-4999 Share Market Orders

 Average Across Nasdaq Stocks 53.2 73.3 91.4 72.9

 Average Across NYSE Stocks 24.3 28.1 50.2 25.6

 Difference 29.0 * 45.2 *** 41.2 47.3 **

*,**, and *** denote statistical significance at the 10%, 5%, and 1% levels, respectively

Average fill rates for marketable, inside the quote and at the quote limit orders are

reported in Tables 22-30.

V. Variance Ratio Tests

A. Motivation

In this section, we use consolidated trade return data to compare the ratios of daily

to weekly (and daily to monthly) return variances for NYSE and Nasdaq stocks.33 In

efficient markets, the return variance measured over any time interval should be

proportional to the length of the interval (i.e., the longer the time interval, the greater the

expected return variance). Market inefficiencies, such as effective spreads between bid

and offer prices, temporary overreactions to order flow due to lack of “resiliency” in a

market, or short-term price manipulation, will all tend to cause return reversals. The

tendency of relatively high (low) returns to be followed by relatively low (high) returns is

called negative serial autocorrelation. As discussed in Roll 34, Hasbrouck and Schwartz

 

32 There was one 500-1999 share market order in a small Nasdaq stock that took more than two

hours to execute. This order was excluded from the analysis of execution times. No other Nasdaq

market order took more than one hour to execute.

33 “Return variance” is the sample variance of returns, which include dividends and other

distributions as well as price appreciation.

34 Roll, R., 1984, "A simple Implicit Measure of the Effective Bid-Ask Spread in an Efficient

Market," Journal of Finance, 1127-1139.
18

35, and Campbell, Lo and MacKinlay 36, in the presence of negative serial autocorrelation

of returns, the observed variances over shorter time intervals (such as days) can be

greater than one would predict given the observed variances over longer time intervals

(such as weeks or months). In other words, the greater the extent of return reversals in a

particular market, the more likely that short-term return variances will be greater in

relation to long-term return variances.

By comparing the ratios of daily to weekly (and daily to monthly) return

variances for NYSE and Nasdaq stocks, we analyze whether the two different market

structures are associated with differing levels of return reversals. One of the advantages

of using the ratios, is that there is a built-in control for the underlying uncertainty as to

the “true” value of the stock. For example, the high variance of returns on technology

stocks is to be expected given the high uncertainty as to their future cash flows. The

point is that this uncertainty will manifest itself in both the daily and weekly return

variances. When we divide the weekly return by the daily return,37 the natural

uncertainty associated with the stock “washes out” and we are left with a measure

associated with transaction costs or some other form of inefficiency.

In light of our earlier findings that Nasdaq effective spreads between bid and offer

prices tend to be greater in several categories of stocks, we would expect that variance

ratios would be greater in Nasdaq stocks than in NYSE stocks for these categories. In

section V.E. below, therefore, we also examine variance ratios after controlling for

differences in effective spreads between the two market structures. If differences in

variance ratios persist between the two market structures, we would predict that they are

associated with types of inefficiencies other than bid-offer spreads.

B. Data and Return Calculation

From the Center for Research in Securities Prices (CRSP), we collect daily

percentage stock returns (price appreciation plus dividends and distributions) from

January 1997 through December 1999 for our matching 221 Nasdaq and NYSE sample

stocks and for the S&P 500 index.

Ri,d = Percentage return for stock i over day d

Md = Percentage return for the S&P 500 index

 

35 Hasbrouck and Schwartz, 1988, "Liquidity and Execution Costs in Equity Markets," Journal of

Portfolio Management, 10-16.

36 Hasbrouck and Schwartz, 1988, "Liquidity and Execution Costs in Equity Markets," Journal of

Portfolio Management, 10-16.

37 While it is perfectly acceptable to take the simple ratio of the weekly (or four week) variance to

the daily variance, we follow the standard approach of re-scaling this ratio by the relative lengths

of the time periods being compared. This scaling makes the “target” value of the ratio equal to

one, assuming no transaction costs or other inefficiencies, and it makes it easier to compare the

values of the weekly/daily variance ratio to the values of the four-week-to-daily variance ratio and

the values of the four-week-to-one-week variance ratio.
19

From the raw returns above, we calculate one-day, one-week and four-week

continuously compounded excess returns as follows:38

dri,d = continuously-compounded excess return for stock i over day d,

calculated as dri,d = ln(1+Ri,d - Md), where ln represents the natural

logarithm function.

wri,w = continuously-compounded excess return for stock i over week w,

calculated as wri,w = dri,d1 + dri,d2 + dri,d3 + dri,d4 + dri,d5, where d1

through d5 are the trading days from Wednesday to Tuesday that

comprise week w.

mri,m = continuously-compounded excess return for stock i over the four-week

period m (approximately a “month”), calculated as mri,m = wri,w1 + wri,w2

+ wri,w3 + wri,w4, where w1 through w4 are the weeks that comprise

month m.39

We use the above notation without the second subscript to refer to the full sample

for a particular stock. For example, dri denotes the full sequence of continuously

compounded daily returns for stock i. Our sample contains 757 daily return observations,

156 weekly return observations and 39 monthly return observations. Because of trading

holidays and days with missing returns, on average there are fewer than 5 days in each

trading week and fewer than 20 days in each four-week period. In the following

discussion, we describe the calculations of ratios that compare weekly return variances to

daily return variances and the ratios that compare four-week return variances to daily

return variances. We also report results for ratios that compare four-week return

variances to one-week return variances, the calculations of which are analogous to those

described below.

In order to calculate the ratios, we need the following quantities for each stock:

nwdi = number of daily observations divided by number of weekly observations

for stock i (average days per week)

nmdi = number of daily observations divided by number of four-week

observations for stock i (average days per four-week period)

C. Methodology for Variance Ratios

As discussed by Campbell, Lo and MacKinlay (1997), the theory underlying the

variance ratios rests on the observation that in an efficient market the return from one day

should not be correlated with the return the next day. By efficient market we mean one

with no transaction costs and rational traders. If there were correlation but no transaction

costs, then this would imply a profitable trading strategy based on the current day’s

 

38 We use excess returns to reduce the cross-sectional correlations in our sample, thereby making the

statistics approximately independent.

39 This statistic can also be defined as dri,d1 + dri,d2 + ... + dri,d20, where d1 through d20 are the 20

trading days that comprise a month.
20

return. The fact that this strategy persists would mean that traders were not trying to

exploit it, thus contradicting their presumed rationality.40

Following Campbell, Lo and MacKinlay, under the hypothetical case of market

efficiency, we model the evolution of the excess return on each stock through time as a

geometric Brownian motion.

41 Under this model, the following variance ratio statistics to

be calculated from our sample have an expected value of one:

week-to-day: Qw,d,i = 









1 

 nwdi

Var[wri]

Var[dri]

four-week-to-day: Qm,d,i = 









1 

 nmdi

Var[mri]

Var[dri]

Of course, we know that actual markets do have transaction costs so we don’t

really expect the above statistics to have averages equal to one for the stocks in our

sample. Rather, these particular statistics provide a convenient way to summarize the

impact of these transaction costs. The more the statistic falls below one, the greater are

the inefficiencies in the market relative to the volatility that stems from uncertainty as to

the stock’s underlying value. Given that the previous section gives us independent

estimates of the effective spreads, we can also investigate the impact of the inefficiencies

that go beyond those associated with the spreads. We return to this issue in subsection E.

below.

D. Results

In Table 31, we compare the one-week-to-day variance ratio statistics for the pairs

of Nasdaq and NYSE stocks in the very large, large, middle, and small categories. The

comparisons use the same tests one through eleven defined in the previous section. The

table shows that the average variance ratios for the Nasdaq and NYSE stocks in the very

large category are statistically indistinguishable from each other. For the other three

categories, the table shows that the ratios drop well below one and that the averages of

the Nasdaq ratios are lower than those for the NYSE. Table 32 shows the results for the

ratios comparing four-week periods to days, and Table 33 shows the results for the ratios

comparing four-week periods to one-week periods.

 

40 This discussion is somewhat simplified for the purposes of clearer exposition. In more complex

models than the one we employ, certain types of predictability can still be consistent with market

efficiency.

41 This model of the return process implies: 1) both the expected value and the variance of the

continuously-compounded return on the stock are proportional to the length of the time interval, 2)

these returns are uncorrelated over any two non-overlapping intervals (consistent with market

efficiency), and 3) that the continuously compounded returns are normally distributed random

variables. This model of returns was popularized by Black and Scholes in their seminal paper on

options pricing theory, and is common in financial research today. Black, F., and M. Scholes,

1973, “The Pricing of Options and Corporate Liabilities,” Journal of Political Economy, 81, 637-

654.
21

E. Inefficiencies Beyond Effective Spreads

The results in Table 31 are is consistent with the larger effective spreads found for

Nasdaq stocks in Section IV. We now turn to the question of whether those effective

spreads fully explain the magnitude of these variance ratios. To answer this question, we

construct a benchmark statistic that gives us the expected value of the variance ratio

under the assumption that the only inefficiency is the transaction cost due to the effective

spread. Following Roll (1984) we assume the effective spread is a constant proportion of

the stock price and that the direction of the last trade of the day is independent from the

direction of the last trade for the previous day. Define

si = ln









Dollar Effective Spreadi 

Stock Price +1

Where the dollar effective spread in the above expression is the order-weighted average

across all market orders for stock i in our sample.

Under these assumptions, the continuously-compounded returns we observe will

include a component equal to +si if the stock is “bouncing” from bid to ask and -si if the

stock is “bouncing” from ask to bid. This means that the variance of the continuouslycompounded return measured over each trading day increases by the amount si

2

/2. The

same is also true for each trading week. If we assume that this is the only inefficiency,

then the variance of the weekly return will have two components:

Var[wri] = Var[wri]* + si

2

/2

where Var[wri]* is the hypothetical variance attributable the uncertainty as to the stock’s

underlying value. If bid-ask bounce were the only inefficiency, then the daily variance

would be equal to (1/ nwdi)Var[wri]* + si

2

/2. Combining this with the previous

expression and using the average of nwdi trading days per week for our sample, we have

the following benchmark for the week-to-day variance ratio assuming the effective

spread is the only inefficiency:

BQw,d,i = 

Var[wri]

Var[wri] +( nwdi -1) si

2

/2

The analogous calculations gives benchmark for the four-week-to-day variance ratio:

BQm,d,i = 

Var[mri]

Var[mri] +( nmdi -1) si

2

/2
22

Using these benchmarks, we calculate adjusted variance statistics for each stock,

defined as follows:

AQw,d,i = Qw,d,i + (1 - BQw,d,i) and AQm,d,i = Qm,d,i + (1 - BQm,d,i)

The results of the various tests comparing these adjusted weekly-to-daily variance ratios

statistics for the Nasdaq and NYSE stocks are shown in Table 34. Not surprisingly, the

adjustments have little impact on the stocks in the very large category, because their

effective spreads are very small, especially as a percent of share price. In the other

categories, the adjustment narrows the differences between the ratios for the Nasdaq and

NYSE stocks. This is also to be expected, because the Nasdaq stocks in these categories

have larger effective spreads. There still appear to be some differences between the

Nasdaq and NYSE stocks, beyond what can be explained by effective spreads. The

results for the adjusted four-week-to-daily and four-week-to-one-week variance ratios are

shown in Tables 35 and 36.

The adjustments in Tables 34, 35 and 36 are based on the effective spread

measured during the week of June 5-9 2000. Accordingly, the remaining difference

between the Nasdaq and NYSE ratios may indicate that the proportional spreads were

relatively larger for the Nasdaq stocks during the 1997-1999 period used for the variance

ratio tests. The differences are also consistent with the existence of inefficiencies that go

beyond proportional spreads. The OATS data are relatively new, and do not permit

separate estimates of the proportional effective spread for the earlier time period.

F. Additional Tests Using Variance Ratios

As an alternative test of spread-based inefficiencies and inefficiencies that go

beyond the spread, we examined 82 US common stocks that moved from the Nasdaq to

the NYSE between July 1998 and August 2000. For each event, we computed daily and

five day continuously-compounded returns for the two 3-month (60 trading days)

windows on either side of the move, excluding the 15 trading days centered on the move.

We calculated two return sequences, one using closing prices and the other using the

midpoints of the NBBO quotes as of 12:30 pm. We calculated the week-to-day variance

ratios for the pre-and post move windows for both of these return series.

We found that the variance ratios using the returns based on closing prices rose by

an average of .28 between the pre-move (Nasdaq) and post-move (NYSE) windows.

This difference is somewhat larger than the differences reported in table 31 for the large,

middle and small categories, and it is statistically significant at the 1% level using a twotailed t-test of the pair-wise differences. When using the returns based on bid-ask

midpoints to eliminate the effects of “bid-ask bounce” we found that the variance ratios

rose by an average of .17. This number is similar in magnitude to the differences

reported in table 34 for the large, middle and small categories, and it is statistically

significant at the 1% level using a two-tailed t-test of the pair-wise differences.
23

VI. Summary

The Report compares the executions of customer orders in securities listed on

Nasdaq to the executions of customer orders in NYSE-listed securities that are routed to

the NYSE. The Report uses customer order data, which has only recently come available

for Nasdaq securities, which enables accurate calculation of effective and realized

spreads and order execution speeds, and also allows separate analysis of different types of

orders. For the most part, the Report uses measures that will soon be available directly

from market centers under Securities Exchange Act Rule 11Ac1-5 -- the Commission’s

recently adopted Execution Quality Disclosure Rule.

The results are separately calculated for four categories of Nasdaq stocks:

1) A group of the very largest Nasdaq stocks in terms of trading volume and

market capitalization, as specifically selected by Nasdaq

2) A random sample of Nasdaq stocks with market capitalization over

$1 billion

3) A random sample of Nasdaq stocks with market capitalization between

$200 million and $1 billion

4) A random sample of Nasdaq stocks with market capitalization less than

$200 million

The Report includes a “matched pair” analysis that compares order executions in

Nasdaq-listed stocks to NYSE order executions in NYSE-listed stocks, where the stocks

in each pair have similar market capitalization, share price, return volatility and trading

volume. This matched pair analysis is complemented and confirmed by other tests that

use larger samples and use regression techniques to control for differences in these and

other features. Seven of these tests rely entirely on regression techniques to make

comparisons across the two samples, without any need to consider specific matched pairs.
24

Table 1

Nasdaq Sample Selection

Nasdaq common stocks in the CRSP database with non-zero price

information on 12/31/99 (some were just quotes with no trades -- see

below) 4341

Filters Applied:

Number

Failing Screen

Percent of

Previous

Sample

Remaining

Sample

Daily returns available from 12/31/97 -

12/31/99 and classified as a Nasdaq

common stock for the full period 929 21% 3412

COMPUSTAT data available (12/31/97) 154 5% 3259

Trade price available on 12/31/99 160 5% 3099

Closing price on 12/31/99 within 10% of

CRSP closing price 21 1% 3078

Trade price available each day in Jan 2000 560 18% 2518

Average of at least 20 trades/day in Jan 2000 316 13% 2202

Average of at least $20,000/day in Jan 2000 0 0% 2202

Trade price available each day in Feb-Apr

2000 201 9% 2001

No day in Feb-Apr 2000 with mean trade

price<$3 357 18% 1644

Sort by Jan 2000 trading volume and select

every eighth stock (drop 5 smallest) 1444 88% 200

Trading data available for June 5-9 1 .5% 199

No multiple classes of the same stock 0 0% 199

Add back very large stocks at Nasdaq’s

request (22) 11% 221
25

Table 2

NYSE Sample Selection

NYSE common stocks in the CRSP database with non-zero price

information on 12/31/99 (some were just quotes with no trades -- see

below) 1904

Filters Applied:

Number

Failing Screen

Percent of

Previous

Sample

Remaining

Sample

Daily returns available from 12/31/97 -

12/31/99 and classified as an NYSE

common stock for the full period 293 15% 1611

COMPUSTAT data available (12/31/97) 47 3% 1564

Trade price available on 12/31/99 24 1% 1540

Closing price on 12/31/99 within 10% of

CRSP closing price 0 0% 1540

Trade price available each day in Jan 2000 66 4% 1474

Average of at least 20 trades/day in Jan 2000 219 15% 1255

Average of at least $20,000/day in Jan 2000 0 0% 1255

Trade price available each day in Feb-Apr

2000 46 4% 1209

No day in Feb-Apr 2000 with mean trade

price<$3 41 3% 1168

Trading data available for June 5-9 17 1% 1151

No multiple classes of the same stock 10 1% 1141
26

Table 3

Comparison of Nasdaq/NYSE Matched Samples

Statistics are equally-weighted averages of the stocks in the group. Standard deviations

of the statistics for the stocks in each group are shown in parenthesis.

Differences

Nasdaq NYSE Average P-value*

Panel A: 221 matched pairs

 Closing Price per share (6/9/00) 30.73

(37.00)

28.46

(28.61)

2.27

(20.19)

.096

 Market Capitalization in mils. (6/9/00) 11,958

(52,792)

10,302

(30,696)

1,656

(27,475)

.371

 Weekly Volatility in pct. (12/97-6/00) 0.123

(.077)

0.095

(.027)

.028

(.053)

.000

 Adjusted dollar vol. in mils (6/5-6/9/00) 81.3

(257)

47.1

(122)

34.2

(153)

.001

Panel B: 58 “well” matched pairs**

 Closing Price per share (6/9/00) 26.85

(20.12)

26.34

(18.78)

.51

(4.48)

.390

 Market Capitalization in mils. (6/9/00) 5,356

(18,235)

5,001

(16,654)

355

(1,761)

.129

 Weekly Volatility in pct. (12/97-6/00) 0.075

(.028)

0.075

(.023)

.000

(.010)

.796

 Adjusted dollar vol. in mils (6/5-6/9/00) 29.6

(86)

26.7

(76)

2.9

(12)

.075

*The p-value is based on the null hypothesis that the mean of the pair-wise differences is

zero.

** Less than 70% total absolute differences across the four matching criteria.
27

Table 4

Statistics for Subgroups of the 221 Matched Pairs of Stocks

Statistics are equally-weighted averages of the stocks in the group. Standard deviations

of the statistics for the differences across stocks in each group are shown in parenthesis.

Size Category

All

Very

Large Large Middle Small

Number of Pairs 221 25 33 72 91

Closing Share Price (6/9/00)

 Nasdaq 30.73 92.99 56.90 23.56 9.81

 NYSE 28.46 77.40 49.68 24.51 10.44

 Difference 2.27 15.60 7.22 -0.96 -0.63

(20.19) (41.84) (31.10) (9.04) (6.80)

Market Capitalizations (mils) (6/9/00)

 Nasdaq 11,958 99,243 3,591 469 103

 NYSE 10,302 76,412 8,103 863 406

 Difference 1,656* 22,831 -4,512 -394* -303*

(27,475) (76,520) (19,559) (1,251) (933)

Standard Deviation of Weekly Return (12/31/97-6/9/00)

 Nasdaq 0.123 0.100 0.105 0.113 0.143

 NYSE 0.094 0.078 0.087 0.086 0.108

 Difference 0.028* 0.022* 0.019* 0.027* 0.034*

(0.053) (0.030) (0.025) (0.039) (0.071)

Adjusted Dollar Trading Volume (mils) (6/5/00-6/9/00)

 Nasdaq 81.3 628.8 55.6 4.8 0.8

 NYSE 47.1 341.7 43.0 4.8 1.0

 Difference 34.3* 287.0* 12.6 -0.1 -0.2

(152.5) (359.1) (82.2) (1.2) (0.9)

* Statistically significant at the 5% level in a two-tailed test.
28

Table 5

Statistics for Subgroups of the 58 “Closest matched” Matched Pairs of Stocks

Statistics are equally-weighted averages of the stocks in the group. Standard deviations

of the statistics for the differences across stocks in each group are shown in parenthesis.

Size Category

All

Very

Large Large Middle Small

Number of Pairs 58 5 14 26 13

Closing Share Price (6/9/00)

 Nasdaq 26.85 57.68 39.78 22.21 10.34

 NYSE 26.34 58.89 36.12 22.88 10.21

 Difference 0.51 -1.21* 3.66 -0.67 0.14

(4.48) (9.01) (6.10) (2.27) (1.06)

Market Capitalizations (mils) (6/9/00)

 Nasdaq 5,356 50,115 3,330 447 144

 NYSE 5,001 45,349 3,434 501 169

 Difference 356 4,766 -104 -54* -26*

(1,761) (3,973) (717) (118) (33)

Standard Deviation of Weekly Return (12/31/97-6/9/00)

 Nasdaq 0.075 0.073 0.081 0.069 0.083

 NYSE 0.075 0.077 0.078 0.068 0.083

 Difference 0.000 -0.004 0.003 0.000 -0.001

(0.010) (0.012) (0.012) (0.009) (0.011)

Adjusted Dollar Trading Volume (mils) (6/5/00-6/9/00)

 Nasdaq 29.6 258.3 26.4 1.9 0.5

 NYSE 26.7 226.1 25.7 2.0 0.5

 Difference 2.9 32.2 0.8 -0.1 0.0

(12.2) (28.7) (5.7) (0.4) (0.1)

* Statistically significant at the 5% level in a two-tailed test.
29

Table 6

Dollar Effective Spreads for 100-499 Share Market Orders

Size Category

Very Large Large Middle Small

Test 1 Closest Matched Pairs

 Number of Pairs (54 total) 5 13 25 11

 Average Across Nasdaq Stocks 0.071 0.150 0.206 0.164

 Average Across NYSE Stocks 0.083 0.093 0.097 0.088

 Difference -0.012 0.057 ** 0.110 *** 0.076 *

Test 2 All Matched Pairs

 Number of Pairs (210 total) 25 32 71 82

 Average Across Nasdaq Stocks 0.097 0.211 0.199 0.171

 Average Across NYSE Stocks 0.087 0.100 0.093 0.079

 Difference 0.010 0.110 *** 0.106 *** 0.092 ***

Other Tests of the Difference

Test 3 (210 pairs, regression) -0.009 0.050 ** 0.101 *** 0.089 ***

Test 4 (same as 3 except 1-yr volatility) -0.013 0.037 * 0.096 *** 0.087 ***

Test 5 (same as 3 plus listing control) -0.006 0.049 ** 0.090 *** 0.053 ***

Number of NYSE stocks in tests 6-10 33 490 336 71

Test 6 regression 0.004 0.097 *** 0.114 *** 0.076 ***

Test 7 (same as 6 except 1-yr volatility) 0.000 0.094 *** 0.115 *** 0.073 ***

Test 8 (same as 6 plus SIC code) -0.006 0.090 *** 0.125 *** 0.076 ***

Test 9 (same as 6 plus listing control) 0.004 0.091 *** 0.110 *** 0.068 ***

Test 10 (same as 6 plus P/E) 0.004 0.091 *** 0.113 *** 0.071 ***

Test 11 (separate slope coefficients) -0.005 0.103 *** 0.104 *** 0.087 ***

Test 12 (individual orders) 0.007 0.095 *** 0.118 *** 0.076 ***

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
30

Table 7

Dollar Effective Spreads for 500-1999 Share Market Orders

Size Category

Very Large Large Middle Small

Test 1 Closest Matched Pairs

 Number of Pairs (47 total) 5 13 22 7

 Average Across Nasdaq Stocks 0.086 0.168 0.276 0.131

 Average Across NYSE Stocks 0.117 0.142 0.139 0.097

 Difference -0.031 0.026 0.136 ** 0.034

Test 2 All Matched Pairs

 Number of Pairs (192 total) 25 32 63 72

 Average Across Nasdaq Stocks 0.148 0.250 0.234 0.170

 Average Across NYSE Stocks 0.125 0.148 0.130 0.100

 Difference 0.023 0.102 *** 0.104 *** 0.070 ***

Other Tests of the Difference

Test 3 (192 pairs, regression) -0.025 0.018 0.116 *** 0.068 ***

Test 4 (same as 3 except 1-yr volatility) -0.026 0.005 0.114 *** 0.064 ***

Test 5 (same as 3 plus listing control) -0.017 0.017 0.097 *** 0.044 **

Number of NYSE stocks in tests 6-10 33 490 327 74

Test 6 regression 0.001 0.082 *** 0.103 *** 0.050 ***

Test 7 (same as 6 except 1-yr volatility) -0.007 0.077 *** 0.099 *** 0.046 ***

Test 8 (same as 6 plus SIC code) -0.010 0.069 *** 0.107 *** 0.063 ***

Test 9 (same as 6 plus listing control) 0.001 0.078 *** 0.098 *** 0.041 ***

Test 10 (same as 6 plus P/E) -0.001 0.073 *** 0.100 *** 0.044 ***

Test 11 (separate slope coefficients) 0.004 0.090 *** 0.101 *** 0.056 ***

Test 12 (individual orders) -0.003 0.074 *** 0.091 *** 0.046 ***

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
31

Table 8

Dollar Effective Spreads for 2000-4999 Share Market Orders

Size Category

Very Large Large Middle Small

Test 1 Closest Matched Pairs

 Number of Pairs (25 total) 5 11 7 2

 Average Across Nasdaq Stocks 0.142 0.244 0.299 0.176

 Average Across NYSE Stocks 0.184 0.190 0.144 0.117

 Difference -0.041 0.055 0.154 ** 0.059

Test 2 All Matched Pairs

 Number of Pairs (114 total) 25 27 36 26

 Average Across Nasdaq Stocks 0.220 0.440 0.259 0.193

 Average Across NYSE Stocks 0.181 0.222 0.151 0.141

 Difference 0.039 * 0.218 *** 0.108 *** 0.052 **

Other Tests of the Difference

Test 3 (114 pairs, regression) -0.019 0.007 0.129 *** -0.001

Test 4 (same as 3 except 1-yr volatility) -0.009 0.034 0.148 *** 0.002

Test 5 (same as 3 plus listing control) -0.016 0.004 0.085 * -0.007

Number of NYSE stocks in tests 6-10 33 466 196 32

Test 6 regression 0.008 0.174 *** 0.066 0.064

Test 7 (same as 6 except 1-yr volatility) 0.005 0.164 *** 0.083 * 0.059

Test 8 (same as 6 plus SIC code) -0.010 0.154 *** 0.065 0.159 *

Test 9 (same as 6 plus listing control) 0.008 0.156 *** 0.057 0.057

Test 10 (same as 6 plus P/E) 0.007 0.162 *** 0.064 0.077

Test 11 (separate slope coefficients) 0.014 0.215 *** 0.030 0.088 *

Test 12 (individual orders) 0.007 0.174 *** 0.104 *** 0.068 **

na denotes “not applicable”

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
32

Table 9

Dollar Realized Spreads for 100-499 Share Market Orders

Size Category

Very Large Large Middle Small

Test 1 Closest Matched Pairs

 Number of Pairs (56 total) 5 13 26 12

 Average Across Nasdaq Stocks 0.025 0.081 0.177 0.155

 Average Across NYSE Stocks 0.025 0.013 0.028 0.048

 Difference 0.000 0.068 ** 0.149 *** 0.107 ***

Test 2 All Matched Pairs

 Number of Pairs (214 total) 25 32 72 85

 Average Across Nasdaq Stocks 0.022 0.135 0.158 0.151

 Average Across NYSE Stocks 0.026 0.020 0.032 0.049

 Difference -0.004 0.116 *** 0.126 *** 0.102 ***

Other Tests of the Difference

Test 3 (214 pairs, regression) -0.023 * 0.075 *** 0.135 *** 0.117 ***

Test 4 (same as 3 except 1-yr volatility) -0.027 ** 0.071 *** 0.140 *** 0.114 ***

Test 5 (same as 3 plus listing control) -0.022 0.070 *** 0.129 *** 0.079 ***

Number of NYSE stocks in tests 6-10 33 490 340 75

Test 6 regression -0.006 0.107 *** 0.128 *** 0.099 ***

Test 7 (same as 6 except 1-yr volatility) -0.011 0.108 *** 0.132 *** 0.096 ***

Test 8 (same as 6 plus SIC code) 0.000 0.108 *** 0.138 *** 0.092 ***

Test 9 (same as 6 plus listing control) -0.006 0.093 *** 0.125 *** 0.090 ***

Test 10 (same as 6 plus P/E) -0.005 0.109 *** 0.128 *** 0.093 ***

Test 11 (separate slope coefficients) -0.002 0.117 *** 0.118 *** 0.117 ***

Test 12 (individual orders) 0.004 0.087 *** 0.121 *** 0.090 ***

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
33

Table 10

Dollar Realized Spreads for 500-1999 Share Market Orders

Size Category

Very Large Large Middle Small

Test 1 Closest Matched Pairs

 Number of Pairs (49 total) 5 13 22 9

 Average Across Nasdaq Stocks 0.046 0.058 0.095 0.087

 Average Across NYSE Stocks 0.015 0.009 0.011 0.037

 Difference 0.030 * 0.050 *** 0.084 *** 0.051 *

Test 2 All Matched Pairs

 Number of Pairs (195 total) 25 32 63 75

 Average Across Nasdaq Stocks 0.061 0.112 0.088 0.108

 Average Across NYSE Stocks 0.014 0.018 0.011 0.041

 Difference 0.047 *** 0.094 *** 0.077 ** 0.067 ***

Other Tests of the Difference

Test 3 (195 pairs, regression) 0.000 0.059 *** 0.095 *** 0.064 ***

Test 4 (same as 3 except 1-yr volatility) 0.008 0.055 *** 0.096 *** 0.061 ***

Test 5 (same as 3 plus listing control) 0.010 0.058 *** 0.102 *** 0.061 ***

Number of NYSE stocks in tests 6-10 33 490 334 76

Test 6 regression 0.030 *** 0.097 *** 0.076 *** 0.067 ***

Test 7 (same as 6 except 1-yr volatility) 0.028 ** 0.097 *** 0.079 *** 0.065 ***

Test 8 (same as 6 plus SIC code) 0.036 *** 0.095 *** 0.079 *** 0.067 ***

Test 9 (same as 6 plus listing control) 0.030 *** 0.087 *** 0.076 *** 0.065 ***

Test 10 (same as 6 plus P/E) 0.032 *** 0.096 *** 0.083 *** 0.058 ***

Test 11 (separate slope coefficients) 0.037 *** 0.101 *** 0.075 ** 0.079 ***

Test 12 (individual orders) 0.023 * 0.075 *** 0.063 * 0.063 ***

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
34

Table 11

Dollar Realized Spreads for 2000-4999 Share Market Orders

Size Category

Very Large Large Middle Small

Test 1 Closest Matched Pairs

 Number of Pairs (25 total) 5 11 7 2

 Average Across Nasdaq Stocks 0.055 0.112 0.208 0.128

 Average Across NYSE Stocks 0.032 0.032 -0.050 0.033

 Difference 0.024 0.080 0.258 * 0.095 *

Test 2 All Matched Pairs

 Number of Pairs (121 total) 25 27 37 32

 Average Across Nasdaq Stocks 0.122 0.166 0.101 0.099

 Average Across NYSE Stocks 0.030 0.052 0.009 0.047

 Difference 0.092 0.114 *** 0.092 *** 0.052 **

Other Tests of the Difference

Test 3 (121 pairs, regression) 0.132 * 0.052 0.108 ** 0.062

Test 4 (same as 3 except 1-yr volatility) 0.144 ** 0.051 0.091 * 0.068

Test 5 (same as 3 plus listing control) 0.156 ** 0.050 0.044 0.033

Number of NYSE stocks in tests 6-10 33 478 245 54

Test 6 regression 0.077 0.134 *** 0.088 ** 0.077 ***

Test 7 (same as 6 except 1-yr volatility) 0.078 0.127 *** 0.091 *** 0.076 ***

Test 8 (same as 6 plus SIC code) 0.042 0.125 *** 0.072 ** 0.086 ***

Test 9 (same as 6 plus listing control) 0.077 0.120 *** 0.083 *** 0.072 ***

Test 10 (same as 6 plus P/E) 0.068 0.132 *** 0.084 *** 0.076 **

Test 11 (separate slope coefficients) 0.098 * 0.148 *** 0.085 ** 0.070 **

Test 12 (individual orders) 0.066 0.130 *** 0.070 *** 0.061 ***

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
35

Table 12

Dollar Quoted Spreads at the Time of Market Order Arrival

Size Category

Very Large Large Middle Small

Test 1 Closest Matched Pairs

 Number of Pairs (57 total) 5 13 26 13

 Average Across Nasdaq Stocks 0.079 0.149 0.211 0.154

 Average Across NYSE Stocks 0.133 0.148 0.157 0.138

 Difference -0.054 ** 0.001 0.053 ** 0.016

Test 2 All Matched Pairs

 Number of Pairs (220 total) 25 32 72 91

 Average Across Nasdaq Stocks 0.097 0.209 0.200 0.170

 Average Across NYSE Stocks 0.143 0.163 0.149 0.124

 Difference -0.046 *** 0.046 ** 0.051 *** 0.046 ***

Other Tests of the Difference

Test 3 (220 pairs, regression) -0.055 *** -0.002 0.042 *** 0.042 **

Test 4 (same as 3 except 1-yr volatility) -0.062 *** -0.016 0.041 *** 0.039 **

Test 5 (same as 3 plus listing control) -0.052 *** -0.002 0.033 ** 0.015

Number of NYSE stocks in tests 6-10 33 490 340 77

Test 6 regression -0.048 *** 0.038 ** 0.059 *** 0.029 ***

Test 7 (same as 6 except 1-yr volatility) -0.053 *** 0.034 ** 0.058 *** 0.027 **

Test 8 (same as 6 plus SIC code) -0.051 *** 0.029 * 0.060 *** 0.025 *

Test 9 (same as 6 plus listing control) -0.048 *** 0.033 ** 0.055 *** 0.022 **

Test 10 (same as 6 plus P/E) -0.049 *** 0.031 ** 0.056 *** 0.023 *

Test 11 (separate slope coefficients) -0.059 *** 0.043 *** 0.053 *** 0.036 ***

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
36

Table 13

Dollar Adjusted Spreads for 100-499 Share Marketable Limit Orders

Size Category

Very Large Large Middle Small

Test 1 Closest Matched Pairs

 Number of Pairs (49 total) 5 14 23 7

 Average Across Nasdaq Stocks 0.080 0.168 0.193 0.183

 Average Across NYSE Stocks 0.087 0.102 0.114 0.093

 Difference -0.007 0.067 ** 0.079 *** 0.090

Test 2 All Matched Pairs

 Number of Pairs (185 total) 25 33 67 60

 Average Across Nasdaq Stocks 0.112 0.219 0.181 0.156

 Average Across NYSE Stocks 0.108 0.108 0.102 0.082

 Difference 0.004 0.110 *** 0.079 *** 0.074 ***

Other Tests of the Difference

Test 3 (185 pairs, regression) -0.014 0.046 * 0.075 *** 0.082 **

Test 4 (same as 3 except 1-yr volatility) -0.019 0.031 0.076 *** 0.080 **

Test 5 (same as 3 plus listing control) -0.007 0.045 * 0.059 *** 0.043 *

Number of NYSE stocks in tests 6-10 33 490 326 53

Test 6 regression -0.004 0.101 *** 0.074 *** 0.058 ***

Test 7 (same as 6 except 1-yr volatility) -0.009 0.098 *** 0.073 *** 0.055 ***

Test 8 (same as 6 plus SIC code) -0.015 0.090 *** 0.080 *** 0.056 ***

Test 9 (same as 6 plus listing control) -0.004 0.094 *** 0.068 *** 0.045 ***

Test 10 (same as 6 plus P/E) -0.005 0.096 *** 0.073 *** 0.041 ***

Test 11 (separate slope coefficients) -0.014 0.108 *** 0.076 *** 0.081 ***

Test 12 (individual orders) 0.002 0.085 *** 0.084 *** 0.056 ***

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
37

Table 14

Dollar Adjusted Spreads for 500-1999 Share Marketable Limit Orders

Size Category

Very Large Large Middle Small

Test 1 Closest Matched Pairs

 Number of Pairs (54 total) 5 14 25 10

 Average Across Nasdaq Stocks 0.092 0.175 0.225 0.161

 Average Across NYSE Stocks 0.124 0.167 0.150 0.123

 Difference -0.031 0.008 0.075 ** 0.038

Test 2 All Matched Pairs

 Number of Pairs (203 total) 25 33 68 77

 Average Across Nasdaq Stocks 0.166 0.251 0.236 0.161

 Average Across NYSE Stocks 0.143 0.184 0.138 0.107

 Difference 0.023 0.067 * 0.098 *** 0.054 ***

Other Tests of the Difference

Test 3 (203 pairs, regression) -0.028 0.009 0.100 *** 0.049 **

Test 4 (same as 3 except 1-yr volatility) -0.017 -0.031 0.097 *** 0.047 **

Test 5 (same as 3 plus listing control) -0.027 0.012 0.074 *** 0.024

Number of NYSE stocks in tests 6-10 33 490 330 68

Test 6 regression -0.006 0.067 *** 0.089 *** 0.039 ***

Test 7 (same as 6 except 1-yr volatility) -0.012 0.061 *** 0.080 *** 0.037 ***

Test 8 (same as 6 plus SIC code) -0.014 0.051 ** 0.092 *** 0.044 ***

Test 9 (same as 6 plus listing control) -0.006 0.063 *** 0.080 *** 0.031 ***

Test 10 (same as 6 plus P/E) -0.008 0.057 ** 0.083 *** 0.034 ***

Test 11 (separate slope coefficients) 0.013 0.077 *** 0.092 *** 0.059 ***

Test 12 (individual orders) -0.006 0.074 *** 0.098 *** 0.039 ***

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
38

Table 15

Dollar Adjusted Spreads for 2000-4999 Share Marketable Limit Orders

Size Category

Very Large Large Middle Small

Test 1 Closest Matched Pairs

 Number of Pairs (32 total) 5 12 13 2

 Average Across Nasdaq Stocks 0.123 0.229 0.273 0.414

 Average Across NYSE Stocks 0.170 0.188 0.196 0.188

 Difference -0.046 0.041 0.076 0.226

Test 2 All Matched Pairs

 Number of Pairs (148 total) 25 30 50 43

 Average Across Nasdaq Stocks 0.227 0.360 0.278 0.207

 Average Across NYSE Stocks 0.186 0.234 0.181 0.132

 Difference 0.041 0.126 ** 0.097 *** 0.075 ***

Other Tests of the Difference

Test 3 (148 pairs, regression) -0.026 -0.009 0.063 0.136

Test 4 (same as 3 except 1-yr volatility) -0.018 -0.038 0.065 * 0.134

Test 5 (same as 3 plus listing control) -0.021 -0.018 0.018 0.093 *

Number of NYSE stocks in tests 6-10 33 479 254 48

Test 6 regression -0.005 0.094 *** 0.070 ** 0.042

Test 7 (same as 6 except 1-yr volatility) -0.009 0.090 ** 0.064 ** 0.038

Test 8 (same as 6 plus SIC code) -0.004 0.076 ** 0.059 ** 0.049

Test 9 (same as 6 plus listing control) -0.005 0.081 ** 0.061 ** 0.025

Test 10 (same as 6 plus P/E) -0.007 0.087 ** 0.055 * 0.035

Test 11 (separate slope coefficients) 0.011 0.122 *** 0.070 * 0.052 **

Test 12 (individual orders) -0.007 0.120 *** 0.081 ** 0.071 ***

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
39

Table 16

Dollar Realized Spreads for 100-499 Share Marketable Limit Orders

Size Category

Very Large Large Middle Small

Test 1 Closest Matched Pairs

 Number of Pairs (49 total) 5 14 24 9

 Average Across Nasdaq Stocks 0.013 -0.009 0.106 0.138

 Average Across NYSE Stocks 0.002 0.022 0.035 0.058

 Difference 0.011 -0.030 0.072 *** 0.081

Test 2 All Matched Pairs

 Number of Pairs (185 total) 25 33 69 69

 Average Across Nasdaq Stocks 0.020 0.037 0.078 0.108

 Average Across NYSE Stocks 0.007 0.019 0.032 0.050

 Difference 0.013 0.018 0.046 *** 0.058 ***

Other Tests of the Difference

Test 3 (185 pairs, regression) 0.012 -0.013 0.058 *** 0.088 **

Test 4 (same as 3 except 1-yr volatility) 0.008 0.007 0.058 *** 0.091 **

Test 5 (same as 3 plus listing control) 0.008 -0.014 0.062 *** 0.067 **

Number of NYSE stocks in tests 6-10 33 490 334 65

Test 6 regression 0.010 0.023 0.043 *** 0.063 ***

Test 7 (same as 6 except 1-yr volatility) 0.011 0.026 0.047 *** 0.063 ***

Test 8 (same as 6 plus SIC code) 0.002 0.025 0.049 *** 0.079 ***

Test 9 (same as 6 plus listing control) 0.010 0.017 0.045 *** 0.056 ***

Test 10 (same as 6 plus P/E) 0.010 0.027 0.047 *** 0.050 ***

Test 11 (separate slope coefficients) 0.011 0.024 0.033 *** 0.066 ***

Test 12 (individual orders) 0.011 0.017 0.021 0.059 ***

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
40

Table 17

Dollar Realized Spreads for 500-1999 Share Marketable Limit Orders

Size Category

Very Large Large Middle Small

Test 1 Closest Matched Pairs

 Number of Pairs (58 total) 5 14 26 13

 Average Across Nasdaq Stocks 0.015 0.020 0.090 0.093

 Average Across NYSE Stocks -0.001 -0.010 0.018 0.035

 Difference 0.015 0.030 0.072 *** 0.058 *

Test 2 All Matched Pairs

 Number of Pairs (208 total) 25 33 69 81

 Average Across Nasdaq Stocks 0.007 0.028 0.043 0.066

 Average Across NYSE Stocks 0.004 0.028 0.013 0.035

 Difference 0.003 0.000 0.030 * 0.032 ***

Other Tests of the Difference

Test 3 (208 pairs, regression) 0.020 * 0.040 0.043 ** 0.041 **

Test 4 (same as 3 except 1-yr volatility) 0.014 -0.007 0.041 ** 0.040 **

Test 5 (same as 3 plus listing control) 0.019 * 0.042 0.046 *** 0.028 *

Number of NYSE stocks in tests 6-10 33 490 337 73

Test 6 regression 0.009 0.014 0.036 ** 0.031 ***

Test 7 (same as 6 except 1-yr volatility) 0.006 0.014 0.038 *** 0.031 ***

Test 8 (same as 6 plus SIC code) -0.006 0.003 0.033 ** 0.025 **

Test 9 (same as 6 plus listing control) 0.009 0.013 0.037 *** 0.026 **

Test 10 (same as 6 plus P/E) 0.009 0.015 0.035 ** 0.029 **

Test 11 (separate slope coefficients) 0.000 0.016 0.033 ** 0.037 **

Test 12 (individual orders) -0.002 0.014 0.004 0.040 ***

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
41

Table 18

Dollar Realized Spreads for 2000-4999 Share Marketable Limit Orders

Size Category

Very Large Large Middle Small

Test 1 Closest Matched Pairs

 Number of Pairs (37 total) 5 13 16 3

 Average Across Nasdaq Stocks -0.010 0.043 0.006 0.204

 Average Across NYSE Stocks 0.009 -0.015 -0.038 0.037

 Difference -0.019 0.058 * 0.044 0.167

Test 2 All Matched Pairs

 Number of Pairs (159 total) 25 31 55 48

 Average Across Nasdaq Stocks 0.016 0.066 0.005 0.034

 Average Across NYSE Stocks 0.011 0.016 -0.001 0.021

 Difference 0.006 0.050 0.006 0.013

Other Tests of the Difference

Test 3 (159 pairs, regression) -0.016 0.084 ** 0.010 0.062

Test 4 (same as 3 except 1-yr volatility) -0.011 0.042 0.011 0.066

Test 5 (same as 3 plus listing control) -0.012 0.082 ** 0.010 0.013

Number of NYSE stocks in tests 6-10 33 485 289 63

Test 6 regression 0.015 0.052 ** -0.010 0.012

Test 7 (same as 6 except 1-yr volatility) 0.014 0.050 ** -0.009 0.009

Test 8 (same as 6 plus SIC code) -0.006 0.039 * -0.012 0.025

Test 9 (same as 6 plus listing control) 0.015 0.048 ** -0.006 0.008

Test 10 (same as 6 plus P/E) 0.015 0.049 ** -0.010 0.007

Test 11 (separate slope coefficients) -0.005 0.049 ** -0.010 -0.005

Test 12 (individual orders) -0.016 -0.011 -0.028 0.011

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
42

Table 19

Average Execution Times (Seconds) for 100-499 Share Market Orders

Size Category

Very Large Large Middle Small

Test 1 Closely Matched Pairs

 Number of Pairs (54 total) 5 13 25 11

 Average Across Nasdaq Stocks 3.4 6.0 7.8 4.5

 Average Across NYSE Stocks 17.1 15.8 26.5 15.8

 Difference -13.7 *** -9.8 *** -18.7 *** -11.3 ***

Test 2 All Matched Pairs

 Number of Pairs (210 total) 25 32 71 82

 Average Across Nasdaq Stocks 1.3 5.9 6.0 3.9

 Average Across NYSE Stocks 17.4 17.3 21.6 22.5

 Difference -16.1 *** -11.3 *** -15.6 *** -18.6 ***

Other Tests of the Difference

Test 3 (210 pairs, regression) -20.5 *** -10.5 *** -15.7 *** -12.2 ***

Test 4 (same as 3 except 1-yr volatility) -19.4 *** -11.9 *** -15.6 *** -13.2 ***

Test 5 (same as 3 plus listing control) -20.9 *** -10.6 *** -16.1 *** -12.6 ***

Number of NYSE stocks in tests 6-10 33 490 336 71

Test 6 regression -16.8 *** -14.7 *** -14.7 *** -18.0 ***

Test 7 (same as 6 except 1-yr volatility) -17.5 *** -14.7 *** -14.5 *** -18.3 ***

Test 8 (same as 6 plus SIC code) -18.1 *** -14.2 *** -14.3 *** -18.5 ***

Test 9 (same as 6 plus listing control) -16.9 *** -13.9 *** -13.8 *** -18.1 ***

Test 10 (same as 6 plus P/E) -16.7 *** -14.7 *** -14.6 *** -17.0 ***

Test 11 (separate slope coefficients) -19.9 *** -15.2 *** -13.7 *** -20.6 ***

The analysis reflects the time until the last execution for orders with multiple executions.

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
43

Table 20

Average Execution Times (Seconds) for 500-1999 Share Market Orders

Size Category

Very Large Large Middle Small

Test 1 Closely Matched Pairs

 Number of Pairs (51 total) 5 13 22 7

 Average Across Nasdaq Stocks 17.3 24.0 25.0 16.8

 Average Across NYSE Stocks 20.6 17.4 27.9 20.6

 Difference -3.3 6.6 ** -2.9 -3.8

Test 2 All Matched Pairs

 Number of Pairs (192 total) 25 32 63 72

 Average Across Nasdaq Stocks 20.8 25.0 22.5 18.6

 Average Across NYSE Stocks 20.7 19.0 24.9 26.4

 Difference 0.0 6.0 ** -2.4 -7.8

Other Tests of the Difference

Test 3 (192 pairs, regression) -9.4 * 5.5 ** -0.7 -8.9

Test 4 (same as 3 except 1-yr volatility) -6.8 4.2 * -1.5 -10.7

Test 5 (same as 3 plus listing control) -9.1 4.9 * -0.2 -3.7

Number of NYSE stocks in tests 6-10 33 490 327 74

Test 6 regression -3.8 0.5 -2.4 -8.7 ***

Test 7 (same as 6 except 1-yr volatility) -5.0 0.3 -0.4 -8.7 ***

Test 8 (same as 6 plus SIC code) -5.1 1.5 -8.9 -9.1 **

Test 9 (same as 6 plus listing control) -3.7 0.9 -5.9 -7.4 **

Test 10 (same as 6 plus p/e ratio) -3.9 0.4 -8.2 -10.7 ***

Test 11 (separate slope coefficients) -4.1 1.3 -3.1 -0.4

The analysis reflects the time until the last execution for orders with multiple executions.

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
44

Table 21

Average Execution Times (Seconds) for 2000-4999 Share Market Orders

Size Category

Very Large Large Middle Small

Test 1 Closely Matched Pairs

 Number of Pairs (25 total) 5 11 7 2

 Average Across Nasdaq Stocks 53.2 73.3 91.4 72.9

 Average Across NYSE Stocks 24.3 28.1 50.2 25.6

 Difference 29.0 * 45.2 *** 41.2 47.3 **

Test 2 All Matched Pairs

 Number of Pairs (114 total) 25 27 36 26

 Average Across Nasdaq Stocks 53.3 89.2 83.8 82.4

 Average Across NYSE Stocks 23.7 30.7 39.4 24.8

 Difference 29.5 *** 58.5 *** 44.4 *** 57.6 ***

Other Tests of the Difference

Test 3 (114 pairs, regression) 27.7 *** 50.0 *** 43.5 ** 59.6 ***

Test 4 (same as 3 except 1-yr volatility) 26.6 *** 53.0 *** 54.0 *** 55.3 ***

Test 5 (same as 3 plus listing control) 27.7 *** 51.3 *** 29.0 ** 68.6 ***

Number of NYSE stocks in tests 6-10 33 466 196 32

Test 6 regression 30.7 *** 30.0 * 68.4 *** 44.8 ***

Test 7 (same as 6 except 1-yr volatility) 28.9 *** 30.2 63.8 *** 43.7 ***

Test 8 (same as 6 plus SIC code) 24.5 *** 27.4 * 56.7 *** 46.8 ***

Test 9 (same as 6 plus listing control) 30.7 *** 31.3 * 69.7 *** 50.3 ***

Test 10 (same as 6 plus p/e ratio) 30.9 *** 30.2 * 60.2 *** 50.1 ***

Test 11 (separate slope coefficients) 25.4 *** 30.1 84.2 ** 61.1 ***

The analysis reflects the time until the last execution for orders with multiple executions.

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
45

Table 22

Average Execution Rates for 100-499 Share Marketable Limit Orders

Size Category

Very Large Large Middle Small

Test 1 Closely Matched Pairs

 Number of Pairs (49 total) 5 14 23 7

 Average Across Nasdaq Stocks 80.0% 79.6% 82.1% 85.3%

 Average Across NYSE Stocks 89.4% 92.4% 95.6% 98.0%

 Difference -9.3% *** -12.8% *** -13.4% *** -12.7% *

Test 2 All Matched Pairs

 Number of Pairs (185 total) 25 33 67 60

 Average Across Nasdaq Stocks 68.3% 72.8% 72.8% 71.1%

 Average Across NYSE Stocks 85.3% 91.3% 95.5% 97.2%

 Difference -17.0% *** -18.5% *** -22.7% *** -26.1% ***

Other Tests of the Difference

Test 3 (185 pairs, regression) -9.3% *** -11.4% *** -17.9% *** -12.5% ***

Test 4 (same as 3 except 1-yr volatility) -12.0% *** -12.9% *** -17.7% *** -11.9% ***

Test 5 (same as 3 plus listing control) -9.2% *** -11.7% *** -16.1% *** -13.6% ***

Number of NYSE stocks in tests 6-10 33 490 326 53

Test 6 regression -11.1% *** -18.0% *** -19.8% *** -21.8% ***

Test 7 (same as 6 except 1-yr volatility) -12.1% *** -18.5% *** -19.0% *** -22.4% ***

Test 8 (same as 6 plus SIC code) -9.8% *** -17.5% *** -20.2% *** -18.4% ***

Test 9 (same as 6 plus listing control) -11.0% *** -17.6% *** -19.5% *** -21.4% ***

Test 10 (same as 6 plus p/e ratio) -11.0% *** -17.8% *** -18.8% *** -20.5% ***

Test 11 (separate slope coefficients) -12.7% *** -19.5% *** -22.2% *** -27.8% ***

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
46

Table 23

Average Execution Rates for 500-1999 Share Marketable Limit Orders

Size Category

Very Large Large Middle Small

Test 1 Closely Matched Pairs

 Number of Pairs (54 total) 5 14 25 10

 Average Across Nasdaq Stocks 69.6% 73.8% 82.6% 84.3%

 Average Across NYSE Stocks 86.6% 88.3% 93.1% 93.5%

 Difference -17.1% ** -14.4% *** -10.5% *** -9.2%

Test 2 All Matched Pairs

 Number of Pairs (203 total) 25 33 68 77

 Average Across Nasdaq Stocks 56.4% 69.4% 74.1% 76.3%

 Average Across NYSE Stocks 84.0% 87.8% 92.2% 94.9%

 Difference -27.6% *** -18.5% *** -18.1% *** -18.6% ***

Other Tests of the Difference

Test 3 (203 pairs, regression) -18.9% *** -12.4% *** -13.2% *** -12.4% ***

Test 4 (same as 3 except 1-yr volatility) -22.5% *** -12.0% *** -12.8% *** -12.6% ***

Test 5 (same as 3 plus listing control) -18.8% *** -11.7% *** -11.6% *** -12.8% ***

Number of NYSE stocks in tests 6-10 33 490 330 68

Test 6 regression -21.9% *** -17.7% *** -13.7% *** -15.2% ***

Test 7 (same as 6 except 1-yr volatility) -22.7% *** -17.6% *** -12.3% *** -15.8% ***

Test 8 (same as 6 plus SIC code) -19.3% *** -17.2% *** -14.5% *** -16.0% ***

Test 9 (same as 6 plus listing control) -21.9% *** -17.8% *** -13.2% *** -15.5% ***

Test 10 (same as 6 plus p/e ratio) -21.9% *** -17.4% *** -12.7% *** -13.4% ***

Test 11 (separate slope coefficients) -25.9% *** -19.3% *** -16.6% *** -18.5% ***

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
47

Table 24

Average Execution Rates for 2000-4999 Share Marketable Limit Orders

Size Category

Very Large Large Middle Small

Test 1 Closely Matched Pairs

 Number of Pairs (32 total) 5 12 13 2

 Average Across Nasdaq Stocks 73.5% 71.0% 69.3% 81.1%

 Average Across NYSE Stocks 86.1% 86.1% 87.9% 75.0%

 Difference -12.6% ** -15.1% *** -18.6% *** 6.1%

Test 2 All Matched Pairs

 Number of Pairs (148 total) 25 30 50 43

 Average Across Nasdaq Stocks 62.9% 63.8% 66.0% 73.8%

 Average Across NYSE Stocks 83.5% 85.6% 89.7% 88.7%

 Difference -20.6% *** -21.8% *** -23.7% *** -14.9% ***

Other Tests of the Difference

Test 3 (148 pairs, regression) -12.1% *** -13.0% *** -18.8% *** -10.0%

Test 4 (same as 3 except 1-yr volatility) -16.9% *** -14.7% *** -17.4% *** -9.9%

Test 5 (same as 3 plus listing control) -11.7% ** -12.8% *** -17.4% *** -13.1% **

Number of NYSE stocks in tests 6-10 33 479 254 48

Test 6 regression -12.5% *** -20.8% *** -18.6% *** -14.3% ***

Test 7 (same as 6 except 1-yr volatility) -13.9% *** -21.0% *** -17.9% *** -13.9% ***

Test 8 (same as 6 plus SIC code) -11.4% *** -19.9% *** -16.7% *** -15.3% ***

Test 9 (same as 6 plus listing control) -12.4% *** -20.9% *** -17.2% *** -15.2% ***

Test 10 (same as 6 plus p/e ratio) -12.3% *** -21.0% *** -17.6% *** -13.1% ***

Test 11 (separate slope coefficients) -18.7% *** -22.1% *** -20.6% *** -13.6% ***

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
48

Table 25

Average Execution Rates for 100-499 Share Inside the Quote Limit Orders

Size Category

Very Large Large Middle Small

Test 1 Closely Matched Pairs

 Number of Pairs (52 total) 5 14 23 10

 Average Across Nasdaq Stocks 27.3% 46.0% 45.2% 53.2%

 Average Across NYSE Stocks 69.8% 66.7% 59.9% 71.6%

 Difference -42.5% *** -20.7% *** -14.7% *** -18.3% *

Test 2 All Matched Pairs

 Number of Pairs (164 total) 25 33 66 50

 Average Across Nasdaq Stocks 33.6% 44.6% 49.2% 51.7%

 Average Across NYSE Stocks 67.0% 62.3% 66.3% 72.8%

 Difference -33.4% *** -17.8% *** -17.1% *** -21.2% ***

Other Tests of the Difference

Test 3 (164 pairs, regression) -37.9% *** -17.7% *** -17.4% *** -20.3% ***

Test 4 (same as 3 except 1-yr volatility) -35.9% *** -17.9% *** -18.3% *** -20.2% ***

Test 5 (same as 3 plus listing control) -38.5% *** -18.1% *** -18.7% *** -23.1% ***

Number of NYSE stocks in tests 6-10 33 489 332 47

Test 6 regression -36.1% *** -21.1% *** -19.1% *** -22.5% ***

Test 7 (same as 6 except 1-yr volatility) -35.6% *** -21.2% *** -19.9% *** -22.9% ***

Test 8 (same as 6 plus SIC code) -33.0% *** -20.0% *** -21.4% *** -27.4% ***

Test 9 (same as 6 plus listing control) -35.9% *** -22.7% *** -19.6% *** -24.6% ***

Test 10 (same as 6 plus p/e ratio) -36.3% *** -20.6% *** -20.1% *** -22.2% ***

Test 11 (separate slope coefficients) -29.7% *** -20.6% *** -18.2% *** -26.2% ***

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
49

Table 26

Average Execution Rates for 500-1999 Share Inside the Quote Limit Orders

Size Category

Very Large Large Middle Small

Test 1 Closely Matched Pairs

 Number of Pairs (53 total) 5 14 23 11

 Average Across Nasdaq Stocks 17.2% 42.0% 40.5% 47.1%

 Average Across NYSE Stocks 69.5% 62.7% 55.4% 63.2%

 Difference -52.3% *** -20.7% *** -14.9% *** -16.1% *

Test 2 All Matched Pairs

 Number of Pairs (192 total) 25 33 65 69

 Average Across Nasdaq Stocks 22.5% 39.2% 43.3% 49.8%

 Average Across NYSE Stocks 68.0% 61.0% 62.2% 65.3%

 Difference -45.4% *** -21.8% *** -18.9% *** -15.5% ***

Other Tests of the Difference

Test 3 (192 pairs, regression) -47.5% *** -14.9% *** -15.2% *** -13.5% ***

Test 4 (same as 3 except 1-yr volatility) -46.8% *** -16.3% *** -13.7% *** -13.2% ***

Test 5 (same as 3 plus listing control) -47.8% *** -15.0% *** -16.2% *** -15.6% ***

Number of NYSE stocks in tests 6-10 33 489 335 67

Test 6 regression -46.3% *** -19.9% *** -18.1% *** -10.9% ***

Test 7 (same as 6 except 1-yr volatility) -46.2% *** -20.7% *** -16.8% *** -11.1% ***

Test 8 (same as 6 plus SIC code) -42.7% *** -20.0% *** -17.8% *** -13.0% ***

Test 9 (same as 6 plus listing control) -46.2% *** -20.2% *** -18.8% *** -12.2% ***

Test 10 (same as 6 plus p/e ratio) -46.4% *** -20.0% *** -18.3% *** -10.1% ***

Test 11 (separate slope coefficients) -42.6% *** -20.1% *** -19.2% *** -13.9% ***

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
50

Table 27

Average Execution Rates for 2000-4999 Share Inside the Quote Limit Orders

Size Category

Very Large Large Middle Small

Test 1 Closely Matched Pairs

 Number of Pairs (33 total) 5 12 13 3

 Average Across Nasdaq Stocks 22.7% 41.7% 40.6% 17.7%

 Average Across NYSE Stocks 78.8% 61.4% 64.5% 62.8%

 Difference -56.2% *** -19.7% ** -23.9% *** -45.1% ***

Test 2 All Matched Pairs

 Number of Pairs (142 total) 25 30 51 36

 Average Across Nasdaq Stocks 29.5% 40.1% 37.5% 49.7%

 Average Across NYSE Stocks 73.3% 61.5% 66.3% 68.4%

 Difference -43.8% *** -21.4% *** -28.7% *** -18.7% ***

Other Tests of the Difference

Test 3 (142 pairs, regression) -45.6% *** -16.7% *** -26.9% *** -33.2% ***

Test 4 (same as 3 except 1-yr volatility) -46.5% *** -16.6% *** -25.5% *** -34.8% ***

Test 5 (same as 3 plus listing control) -46.3% *** -16.7% *** -29.7% *** -31.9% ***

Number of NYSE stocks in tests 6-10 33 471 256 46

Test 6 regression -40.6% *** -23.8% *** -25.9% *** -22.6% ***

Test 7 (same as 6 except 1-yr volatility) -41.2% *** -23.6% *** -23.7% *** -23.7% ***

Test 8 (same as 6 plus SIC code) -36.6% *** -23.0% *** -22.7% *** -24.0% ***

Test 9 (same as 6 plus listing control) -40.7% *** -23.8% *** -25.1% *** -23.9% ***

Test 10 (same as 6 plus p/e ratio) -40.6% *** -23.6% *** -25.6% *** -24.8% ***

Test 11 (separate slope coefficients) -42.2% *** -22.8% *** -30.0% *** -17.3% **

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
51

Table 28

Average Execution Rates for 100-499 Share at the Quote Limit Orders

Size Category

Very Large Large Middle Small

Test 1 Closely Matched Pairs

 Number of Pairs (53 total) 5 14 26 8

 Average Across Nasdaq Stocks 41.3% 33.1% 29.7% 38.9%

 Average Across NYSE Stocks 47.7% 35.1% 37.9% 42.3%

 Difference -6.4% * -2.1% -8.3% -3.4%

Test 2 All Matched Pairs

 Number of Pairs (184 total) 25 33 70 56

 Average Across Nasdaq Stocks 40.5% 34.1% 38.2% 44.3%

 Average Across NYSE Stocks 47.1% 34.3% 40.0% 44.8%

 Difference -6.6% *** -0.2% -1.8% -0.4%

Other Tests of the Difference

Test 3 (184 pairs, regression) -6.6% *** 0.3% -7.5% * -3.4%

Test 4 (same as 3 except 1-yr volatility) -7.1% *** 0.1% -6.6% * -3.8%

Test 5 (same as 3 plus listing control) -7.6% *** 0.1% -11.2% *** -2.4%

Number of NYSE stocks in tests 6-10 33 490 335 66

Test 6 regression -9.7% *** -4.8% ** -2.6% -6.9% *

Test 7 (same as 6 except 1-yr volatility) -9.9% *** -4.6% ** -2.8% -7.2% *

Test 8 (same as 6 plus SIC code) -8.5% *** -3.8% * -4.7% ** -7.3%

Test 9 (same as 6 plus listing control) -9.6% *** -4.9% ** -3.0% -6.7%

Test 10 (same as 6 plus p/e ratio) -9.9% *** -4.7% ** -3.2% -7.4% *

Test 11 (separate slope coefficients) -5.6% ** -4.2% ** -2.2% -6.3%

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
52

Table 29

Average Execution Rates for 500-1999 Share at the Quote Limit Orders

Size Category

Very Large Large Middle Small

Test 1 Closely Matched Pairs

 Number of Pairs (53 total) 5 14 26 8

 Average Across Nasdaq Stocks 29.7% 35.9% 31.0% 34.8%

 Average Across NYSE Stocks 48.3% 35.9% 33.8% 45.8%

 Difference -18.6% ** 0.0% -2.8% -11.1%

Test 2 All Matched Pairs

 Number of Pairs (194 total) 25 33 68 68

 Average Across Nasdaq Stocks 33.7% 35.6% 37.3% 37.9%

 Average Across NYSE Stocks 48.1% 37.8% 39.0% 44.6%

 Difference -14.4% *** -2.2% -1.7% -6.7% ***

Other Tests of the Difference

Test 3 (194 pairs, regression) -10.8% ** 2.4% -3.7% -10.0% **

Test 4 (same as 3 except 1-yr volatility) -11.3% *** 3.3% -2.5% -10.0% ***

Test 5 (same as 3 plus listing control) -12.7% *** 3.6% -4.7% -9.9% ***

Number of NYSE stocks in tests 6-10 33 489 334 66

Test 6 regression -15.9% *** -3.5% -4.0% * -10.5% ***

Test 7 (same as 6 except 1-yr volatility) -15.7% *** -3.8% -3.5% -10.5% ***

Test 8 (same as 6 plus SIC code) -14.6% *** -3.1% -5.4% ** -8.9% **

Test 9 (same as 6 plus listing control) -16.1% *** -3.2% -5.1% ** -11.3% ***

Test 10 (same as 6 plus p/e ratio) -16.3% *** -4.0% -3.9% -10.6% ***

Test 11 (separate slope coefficients) -11.9% *** -5.1% ** -4.8% * -11.5% **

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
53

Table 30

Average Execution Rates for 2000-4999 Share at the Quote Limit Orders

Size Category

Very Large Large Middle Small

Test 1 Closely Matched Pairs

 Number of Pairs (36 total) 5 13 16 2

 Average Across Nasdaq Stocks 50.8% 40.3% 34.9% 26.8%

 Average Across NYSE Stocks 57.3% 47.5% 44.1% 34.3%

 Difference -6.6% -7.2% -9.2% -7.4%

Test 2 All Matched Pairs

 Number of Pairs (143 total) 25 31 53 34

 Average Across Nasdaq Stocks 46.0% 41.7% 37.7% 36.2%

 Average Across NYSE Stocks 60.2% 49.5% 50.6% 47.9%

 Difference -14.2% *** -7.8% ** -13.0% *** -11.7% ***

Other Tests of the Difference

Test 3 (143 pairs, regression) -8.3% -1.1% -17.0% *** -12.5% *

Test 4 (same as 3 except 1-yr volatility) -12.7% ** 0.0% -16.3% *** -12.6% *

Test 5 (same as 3 plus listing control) -8.0% -0.7% -19.3% *** -11.5%

Number of NYSE stocks in tests 6-10 33 477 271 51

Test 6 regression -11.1% *** -11.4% *** -12.5% *** -20.6% ***

Test 7 (same as 6 except 1-yr volatility) -12.3% *** -10.8% *** -13.1% *** -20.9% ***

Test 8 (same as 6 plus SIC code) -9.5% *** -11.1% *** -11.3% *** -23.4% ***

Test 9 (same as 6 plus listing control) -11.1% *** -10.3% *** -12.1% *** -20.6% ***

Test 10 (same as 6 plus p/e ratio) -11.2% *** -11.6% *** -12.1% *** -22.2% ***

Test 11 (separate slope coefficients) -13.4% *** -13.9% *** -13.9% *** -10.7% *

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
54

Table 31

Weekly-to-Daily Variance Ratios

Size Category

Very Large Large Middle Small

Test 1 Closest Matched Pairs

 Number of Pairs (58 total) 5 14 26 13

 Average Across Nasdaq Stocks 0.940 0.834 0.790 0.854

 Average Across NYSE Stocks 0.956 0.968 0.996 1.034

 Difference -0.016 -0.135 ** -0.206 *** -0.180 **

Test 2 All Matched Pairs

 Number of Pairs (221 total) 25 33 72 91

 Average Across Nasdaq Stocks 0.979 0.935 0.859 0.821

 Average Across NYSE Stocks 0.963 0.980 1.006 1.032

 Difference 0.016 -0.045 -0.147 *** -0.210 ***

Other Tests of the Difference

Test 3 (221 pairs, regression) -0.053 -0.085 * -0.159 *** -0.219 ***

Test 4 (same as 3 except 1-yr volatility) -0.006 -0.062 -0.151 *** -0.218 ***

Test 5 (same as 3 plus listing control) -0.052 -0.072 -0.155 *** -0.219 ***

Number of NYSE stocks in tests 6-10 33 490 340 77

Test 6 regression -0.029 -0.119 *** -0.223 *** -0.140 ***

Test 7 (same as 6 except 1-yr volatility) -0.004 -0.095 *** -0.212 *** -0.143 ***

Test 8 (same as 6 plus SIC code) 0.025 -0.112 *** -0.192 *** -0.164 ***

Test 9 (same as 6 plus listing control) -0.029 -0.104 *** -0.219 *** -0.153 ***

Test 10 (same as 6 plus p/e ratio) -0.029 -0.116 *** -0.208 *** -0.121 ***

Test 11 (separate slope coefficients) -0.049 -0.129 *** -0.283 *** -0.242 ***

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
55

Table 32

Four-Week-to-Daily Variance Ratios

Size Category

Very Large Large Middle Small

Test 1 Closest Matched Pairs

 Number of Pairs (58 total) 5 14 26 13

 Average Across Nasdaq Stocks 0.832 0.671 0.636 0.680

 Average Across NYSE Stocks 0.874 1.032 0.917 0.946

 Difference -0.042 -0.361 *** -0.281 *** -0.266 ***

Test 2 All Matched Pairs

 Number of Pairs (221 total) 25 33 72 91

 Average Across Nasdaq Stocks 0.873 0.833 0.752 0.698

 Average Across NYSE Stocks 0.882 0.990 0.981 0.919

 Difference -0.009 -0.157 ** -0.229 *** -0.221 ***

Other Tests of the Difference

Test 3 (221 pairs, regression) -0.090 -0.244 *** -0.221 *** -0.232 ***

Test 4 (same as 3 except 1-yr volatility) -0.034 -0.237 *** -0.209 *** -0.223 ***

Test 5 (same as 3 plus listing control) -0.109 -0.237 *** -0.204 *** -0.224 ***

Number of NYSE stocks in tests 6-10 33 490 340 77

Test 6 regression -0.038 -0.194 *** -0.258 *** -0.167 ***

Test 7 (same as 6 except 1-yr volatility) -0.010 -0.175 *** -0.248 *** -0.164 ***

Test 8 (same as 6 plus SIC code) 0.081 -0.208 *** -0.226 *** -0.182 ***

Test 9 (same as 6 plus listing control) -0.038 -0.189 *** -0.251 *** -0.173 ***

Test 10 (same as 6 plus p/e ratio) -0.037 -0.196 *** -0.262 *** -0.142 ***

Test 11 (separate slope coefficients) -0.116 -0.194 *** -0.322 *** -0.205 *

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
56

Table 33

Four-Week-to-One-Week Variance Ratios

Size Category

Very Large Large Middle Small

Test 1 Closest Matched Pairs

 Number of Pairs (58 total) 5 14 26 13

 Average Across Nasdaq Stocks 0.871 0.790 0.793 0.785

 Average Across NYSE Stocks 0.912 1.049 0.901 0.903

 Difference -0.041 -0.260 *** -0.108 -0.118 *

Test 2 All Matched Pairs

 Number of Pairs (221 total) 25 33 72 91

 Average Across Nasdaq Stocks 0.887 0.882 0.861 0.845

 Average Across NYSE Stocks 0.915 0.999 0.969 0.887

 Difference -0.028 -0.117 ** -0.108 *** -0.041

Other Tests of the Difference

Test 3 (221 pairs, regression) -0.045 -0.190 *** -0.089 * -0.056

Test 4 (same as 3 except 1-yr volatility) -0.022 -0.202 *** -0.086 * -0.047

Test 5 (same as 3 plus listing control) -0.069 -0.193 *** -0.081 * -0.045

Number of NYSE stocks in tests 6-10 33 490 340 77

Test 6 regression -0.021 -0.098 ** -0.074 ** -0.046

Test 7 (same as 6 except 1-yr volatility) -0.010 -0.103 ** -0.073 * -0.036

Test 8 (same as 6 plus SIC code) 0.052 -0.123 ** -0.061 -0.036

Test 9 (same as 6 plus listing control) -0.021 -0.109 ** -0.073 * -0.036

Test 10 (same as 6 plus p/e ratio) -0.021 -0.106 ** -0.092 ** -0.037

Test 11 (separate slope coefficients) -0.084 -0.083 * -0.082 ** 0.001

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
57

Table 34

Adjusted† Weekly-to-Daily Variance Ratios

Size Category

Very Large Large Middle Small

Test 1 Closest Matched Pairs

 Number of Pairs (58 total) 5 14 26 13

 Average Across Nasdaq Stocks 0.941 0.875 0.880 0.965

 Average Across NYSE Stocks 0.957 0.978 1.033 1.097

 Difference -0.016 -0.102 -0.153 *** -0.132

Test 2 All Matched Pairs

 Number of Pairs (221 total) 25 33 72 91

 Average Across Nasdaq Stocks 0.980 0.958 0.912 0.929

 Average Across NYSE Stocks 0.964 0.985 1.029 1.095

 Difference 0.016 -0.027 -0.117 *** -0.167 ***

Other Tests of the Difference

Test 3 (221 pairs, regression) -0.054 -0.060 -0.125 *** -0.165 ***

Test 4 (same as 3 except 1-yr volatility) -0.006 -0.040 -0.116 *** -0.167 ***

Test 5 (same as 3 plus listing control) -0.053 -0.046 -0.116 *** -0.182 ***

Number of NYSE stocks in tests 6-10 33 490 340 77

Test 6 regression -0.029 -0.093 *** -0.173 *** -0.111 ***

Test 7 (same as 6 except 1-yr volatility) -0.005 -0.071 *** -0.163 *** -0.124 ***

Test 8 (same as 6 plus SIC code) 0.024 -0.088 *** -0.144 *** -0.132 ***

Test 9 (same as 6 plus listing control) -0.029 -0.077 *** -0.165 *** -0.125 ***

Test 10 (same as 6 plus p/e ratio) -0.029 -0.089 *** -0.155 *** -0.095 ***

Test 11 (separate slope coefficients) -0.049 -0.105 *** -0.237 *** -0.192 ***

†

 eliminating the impact of market order effective spreads

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
58

Table 35

Adjusted† Four-Week-to-Daily Variance Ratios

Size Category

Very Large Large Middle Small

Test 1 Closest Matched Pairs

 Number of Pairs (58 total) 5 14 26 13

 Average Across Nasdaq Stocks 0.834 0.743 0.774 0.837

 Average Across NYSE Stocks 0.876 1.043 0.971 1.031

 Difference -0.041 -0.300 *** -0.197 *** -0.194 **

Test 2 All Matched Pairs

 Number of Pairs (221 total) 25 33 72 91

 Average Across Nasdaq Stocks 0.874 0.870 0.829 0.844

 Average Across NYSE Stocks 0.884 0.997 1.013 1.004

 Difference -0.010 -0.127 ** -0.184 *** -0.161 ***

Other Tests of the Difference

Test 3 (221 pairs, regression) -0.091 -0.195 *** -0.164 *** -0.157 ***

Test 4 (same as 3 except 1-yr volatility) -0.034 -0.192 *** -0.152 *** -0.153 ***

Test 5 (same as 3 plus listing control) -0.110 -0.187 *** -0.139 *** -0.172 ***

Number of NYSE stocks in tests 6-10 33 490 340 77

Test 6 regression -0.039 -0.151 *** -0.184 *** -0.124 ***

Test 7 (same as 6 except 1-yr volatility) -0.011 -0.136 *** -0.174 *** -0.135 ***

Test 8 (same as 6 plus SIC code) 0.080 -0.166 *** -0.157 *** -0.132 **

Test 9 (same as 6 plus listing control) -0.039 -0.145 *** -0.171 *** -0.134 ***

Test 10 (same as 6 plus p/e ratio) -0.038 -0.153 *** -0.183 *** -0.104 **

Test 11 (separate slope coefficients) -0.116 -0.157 *** -0.255 *** -0.144 *

†

 eliminating the impact of market order effective spreads

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
59

Table 36

Adjusted† Four-Week-to-One-Week Variance Ratios

Size Category

Very Large Large Middle Small

Test 1 Closest Matched Pairs

 Number of Pairs (58 total) 5 14 26 13

 Average Across Nasdaq Stocks 0.872 0.814 0.822 0.817

 Average Across NYSE Stocks 0.913 1.051 0.911 0.919

 Difference -0.041 -0.237 *** -0.089 -0.102 *

Test 2 All Matched Pairs

 Number of Pairs (221 total) 25 33 72 91

 Average Across Nasdaq Stocks 0.887 0.893 0.877 0.877

 Average Across NYSE Stocks 0.915 1.000 0.975 0.904

 Difference -0.028 -0.107 ** -0.098 ** -0.027

Other Tests of the Difference

Test 3 (221 pairs, regression) -0.045 -0.171 *** -0.077 * -0.037

Test 4 (same as 3 except 1-yr volatility) -0.022 -0.185 *** -0.074 * -0.029

Test 5 (same as 3 plus listing control) -0.069 -0.174 *** -0.066 * -0.032

Number of NYSE stocks in tests 6-10 33 490 340 77

Test 6 regression -0.021 -0.084 ** -0.058 ** -0.033

Test 7 (same as 6 except 1-yr volatility) -0.010 -0.089 ** -0.057 * -0.027

Test 8 (same as 6 plus SIC code) 0.052 -0.109 ** -0.045 -0.022

Test 9 (same as 6 plus listing control) -0.021 -0.094 ** -0.056 * -0.023

Test 10 (same as 6 plus p/e ratio) -0.021 -0.091 ** -0.074 ** -0.025

Test 11 (separate slope coefficients) -0.084 -0.072 * -0.067 ** 0.015

†

 eliminating the impact of market order effective spreads

* Statistically significant at the 10% level in a two-tailed test.

** Statistically significant at the 5% level in a two-tailed test.

*** Statistically significant at the 1% level in a two-tailed test.
A1

Appendix A: Academic Literature Review

Comparisons of the Same Stock Across Different Markets

Study Sample

Period

Findings

Ying, Lewellen,

Schlarbaum and Lease

 1977 JFQA

1970’s Positive price reactions result when firms announce

their intent to list on the NYSE (from OTC market).

Sanger and McConnell

1986 JFQA

1970’s80’sPositive price reactions to announcement of OTC to

NYSE moves, during post-announcement pre-listing

period and post-listing period. When Nasdaq

implemented, only listing returns remain positive.

Grammatikos and

Papaioannou 1986 JFR

1975-

81

For 88 non-financial firms switching from Nasdaq to

NYSE or Amex, the positive price reaction to the

announcement is isolated in low liquidity Nasdaq

firms only.

Baker and Edelman

1991 QJBE

1982-

87

For 62 stocks that switch from Nasdaq to Amex, low

liquidity stocks exhibit positive price reactions to the

announcement while higher liquidity stocks do not.

Lee

1993 JF

1988-

89

For NYSE listed securities, price executions at the

Cincinnati, Midwest, and New York stock

exchanges are most favorable to trade initiators, with

NASD executions the least favorable. The difference

is largest for the smallest trades. The author

questions the adequacy of the existing ITS, the

broker's responsibility for 'best execution,' and the

propriety of order flow inducements.

Kadlec and McConnell

1994 JF

1980’s For Nasdaq to NYSE movers, positive

announcement returns and prelisting returns.

Consistent with both liquidity benefits as well as

improved investor recognition.

Christie and Huang

1994 JFI

1990 For firms that moved from Nasdaq to the NYSE

(and Amex), trading costs fell by 4.7 (5.2) cents per

share. For NYSE stocks, the trading cost reductions

are equally divided between quote improvements

and the routing of trades to the NYSE. Trading cost

improvements vary inversely with trade sizes and

positively with dollar spreads and the greatest

liquidity benefits from listing accrue to the less

liquid stocks.
A2

Barclay

1997 JFE

1983-92 For 472 Nasdaq stocks that move to the Amex or

NYSE, effective and quoted spreads fall and the

magnitude of the drop is related to the avoidance of

odd eighths in dealer markets.

Clyde, Schultz and

Zaman 1997 JF

1992-95 For 47 Amex stocks that move to the Nasdaq, effective

and quoted spreads increase by 100%, with a puzzling

positive reaction to the announced switch.

Bessembinder

1999 JFQA

1996-97 For 190 firms moving from Nasdaq to NYSE, spreads

and volatility decline, with firms subject to new

Nasdaq order handling rules experiencing less dramatic

changes.

Heidle and Huang

1999 Working Paper

1996 For 122 stocks that switch among NYSE, Amex and

Nasdaq, effective and quoted spreads are found to be

larger in dealer markets. Dealer markets are more

anonymous with a 35% higher probability of trading

against informed traders.

Huang and Stoll

1999 Working Paper

1995 19 British stocks traded as ADRs on the NYSE have

higher spreads but greater depth in the London dealer

market.

Jones and Lipson

1999 Working Paper

1993-95 Examining 291 firms that move from Nasdaq to NYSE

or Amex, they find it takes an hour for Nasdaq prices to

fully adjust to trading activity. They suggest studies

which rely on price changes to infer trading cost

components should account for Nasdaq’s partial price

adjustments. In contrast to prior research, they find

larger adverse selection costs on Nasdaq vs. the NYSE.

Jones and Lipson

1999 Working Paper

1993-95 Comparing institutional execution costs for 148

Nasdaq-NYSE and 64 Amex-NYSE movers, they find

execution costs including commissions are

indistinguishable across exchanges. They also find

momentum trading and “working” of orders is greater

on the NYSE. Suggests that institutions actively

manage execution strategies, taking into account the

market characteristics where they trade.
A3

Comparisons of Matched Stocks across Different Markets

Study Sample

Period

Findings

Hasbrouck and Schwartz

1986 Amex Report

1980’s Nasdaq spreads are larger than Amex.

Marsh and Rock

1986 Amex Report

1980’s Nasdaq spreads are larger than Amex.

Chan and Lakonishok

1995 JF

1986-88 Compared 37 institutional investors’ execution costs

(market impact plus commission) on the NYSE and

Nasdaq controlling for firm size, trade size, and the

money management firm's identity. Costs are lower on

Nasdaq for trades in smaller firms, while costs are lower

on NYSE for trading larger stocks. The cost differences

are sensitive to the time period.

Huang and Stoll

1996 JFE

1991 Matched 175 NYSE and Nasdaq stocks on price, shares

outstanding, long-term debt, SIC, and book value.

Nasdaq quoted, effective, realized and implied spreads

are about twice as large likely from

internalization/preferencing and alternative interdealer

systems that limit Nasdaq quote competition.

Booth, Iverson and

Sarkar

1996 Working Paper

1990’s? Sample of Nasdaq stocks compared to German stocks.

In general, the agency/auction market in Germany results

in lower spreads than the Nasdaq dealer market.

Keim and Madhavan

1996 RFS

1985-92 For 5625 block trades negotiated “upstairs” for NYSE or

across Nasdaq, found significantly larger temporary

price effects on Nasdaq suggesting liquidity may be

larger on NYSE.

Keim and Madhavan

1997 JFE

1991-93 21 institutions’ trades show lower costs on NYSE than

comparable trades on Nasdaq. The difference may result

from market structures or from differences in trader or

dealer behaviors.

LaPlante and

Muscarella 1997 JFE

1990 Block trades for the largest Nasdaq stocks appear to be

more expensive than similar block trades on the NYSE

as measured by both temporary and permanent price

effects.

Bessembinder and

Kaufman

1997 JFE

1994 For trades completed on the NYSE, the NASD dealer

market, and the regional exchanges, effective spreads are

only slightly smaller on the NYSE. However, realized

bid-ask spreads are lower on the NYSE by a factor of

two to three. The differential is attributable to the

successful 'cream skimming' of uninformed trades by

off-NYSE marketmakers. The findings reinforce

existing concerns about whether orders are routed so as

to receive “best execution”.
A4

Bessembinder and

Kaufman

1997 JFQA

1994 The average trade execution costs for sets of large,

medium, and small capitalization stocks listed on the

NYSE and Nasdaq. All cost measures, including quoted

spreads, effective spreads and realized spreads are larger

for Nasdaq stocks. The differences are greater for

medium and small capitalization issues and for small

trades. These differentials cannot be attributed to the

adverse selection costs of market making.

Bessembinder

1999 JFQA

1997 Matched 539 Nasdaq and NYSE stocks on market

capitalization and found smaller differences in trade

execution costs across markets post-order handling rules,

attributing the persistence to Nasdaq preferencing

agreements.

Venkataraman

1999 Working Paper

1997-98 Compares the Paris pure limit order market with the

NYSE and finds that the NYSE has lower transaction

costs after controlling for size and price.

Christie, Harris and

Kandel

1999 Working Paper

1997 Compares matched sample (based on market

capitalization and price) of NYSE and Nasdaq firms and

finds lower effective and quoted spreads on the NYSE

for mid-sized and smaller firms. The 25 most active

Nasdaq stocks subject to new order handling rules and

trading in 1/16th markets show no difference.

Weston

Dec. 2000 JF

1996-97 Examines effects of the order handling rules on 88

Nasdaq stocks and concludes the decline in bid-ask

spreads reduced dealers’ rents. Matches the Nasdaq

stocks to NYSE stocks and finds that differences in their

spreads was greatly reduced after the OHR. Small

differences in spreads remain.

Synopsis of Control Variables

Most studies cited above control in one way or another for security characteristics.

One of the most comprehensive set of controls is contained in Huang and Stoll (1996),

who control for: price, shares outstanding, long-term debt, SIC code, and book value.

Weston (2000) uses combinations of price, market capitalization, volatility, volume, trade

size, and SIC codes to construct the three matched samples. The most common matching

criterion is market capitalization, which is both readily available in the CRSP database and

highly correlated with size, price and trading activity measures.
B1

Appendix B: Graphical Comparison of NYSE and NASDAQ Stocks

%

o

f

S

a

m

p

l

e

Market Capitalization in Millions (Log Scale Midpoints)

Histogram of Market Capitalization for the NYSE

NYSE Matched Sample (221 firms) All NYSE (1904 Firms)

%

o

f

S

a

m

p

l

e

Market Capitalization in Millions (Log Scale Midpoints)

Histogram of Market Capitalization for the NASD

NASD Matched Sample (221 firms) All NASD (4341 Firms)
B2

%

o

f

S

a

m

p

l

e

Market Capitalization in Millions (Log Scale Midpoints)

Histogram of Market Capitalization for the NYSE

NYSE Matched Sample (58 firms) All NYSE (1904 Firms)

%

o

f

S

a

m

p

l

e

Market Capitalization in Millions (Log Scale Midpoints)

Histogram of Market Capitalization for the NASD

NASD Matched Sample (58 firms) All NASD (4341 Firms)
B3

%

o

f

S

a

m

p

l

e

Market Capitalization in Millions (Log Scale Midpoint)

Histogram of Market Capitalization for the NYSE Versus NASD

All NYSE (1904 Firms) All NASD (4341 Firms)

%

o

f

S

a

m

p

l

e

Market Capitalization in Millions (Log Scale Midpoints)

Histogram of Market Capitalization Comparing NYSE v. NASD

NYSE Matched Sample (58 firms) NASD Matched Sample (58 firms)
B4

%

o

f

S

a

m

p

l

e

Market Capitalization in Millions (Log Scale Midpoints)

Histogram of Market Capitalization Comparing NYSE v. NASD

NASD Matched Sample (221 firms) NYSE Matched Sample (221 firms)

0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 0.18 0.20 0.28 0.36

0

5

10

15

20

25

30

35

%

o

f

S

a

m

p

l

e

Market Volatility-Standard Deviation of Weekly Returns (Midpoints)

Histogram of Market Volatility for the NYSE

NYSE Matched Sample (221 firms) All NYSE (1611 firms)
B5

0 . 0 2 0 . 0 4 0 . 0 6 0 . 0 8 0.1 0 0 . 1 2 0 . 1 4 0 . 1 6 0 . 1 8 0.2 0 0.2 2 0.2 4

0 . 2 6 0 . 2 8

0 . 3 0 0.3 2

0.3 4 >

0.3 4

0

5

1 0

1 5

2 0

2 5

%

o

f

S

a

m

p

l

e

Market Vo l atility-Standard Deviation of Week ly Returns (Midpoints )

H istogra m o f M a rket Volatility for the NAS D

NASD Ma tched Samp le (221 fir m s ) A ll NASD (3412 fir m s )

0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 0.18 0.20 0.28 0.36

0

5

10

15

20

25

30

35

%

o

f

S

a

m

p

l

e

Market Volatility-Standard Deviation of Weekly Returns (Midpoint)

Histogram of Market Volatility for the NYSE

All NYSE (58 firms) All NYSE (1611 firms)
B6

0.0 2 0.0 4 0.0 6 0.0 8 0.1 0 0.1 2 0 . 1 4 0 . 1 6 0.1 8 0 . 2 0 0.2 2 0 . 2 4

0.2 6 0.2 8

0.3 0 0.3 2

0 . 3 4 >

0.3 4

0

5

1 0

1 5

2 0

2 5

3 0

%

o

f

S

a

m

p

l

e

Market Vo l a tility- S tandard Deviation of W eekly Returns (Midpoint )

H istogra m of Marke t V o latilit y f or the NAS D

NASD Ma tched Samp le (58 fir m s ) A ll NASD (3412 fir m s )

0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 0.18 0.20 0.22 0.24 0.26 0.28 0.30 0.32 0.34 >

0.34

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

%

o

f

S

a

m

p

l

e

Market Volatility-Standard Deviation of Weekly Returns (Midpoint)

Histogram of Market Volatility for NYSE Versus NASD

All NASD (3412 firms) All NYSE (1611 firms)
B7

0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 0.18 0.20 0.22 0.24 0.26 0.28 0.30 0.32 0.34 >

0.34

0

5

10

15

20

25

30

35

%

o

f

S

a

m

p

l

e

Market Volatility-Standard Deviation of Weekly Returns (Midpoint)

Histogram of Market Volatility NYSE v. NASD

NASD Matched Sample (58 firms) All NYSE (58 firms)

0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 0.18 0.20 0.22 0.24 0.26 0.28 0.30 0.32 0.34 >

0.34

0

5

10

15

20

25

30

%

o

f

S

a

m

p

l

e

Market Volatility-Standard Deviation of Weekly Returns (Midpoint)

Histogram of Market Volatility NYSE v. NASD

NASD Matched Sample (221 firms) NYSE Matched Sample (221 firms)
B8

5 15 25 35 45 55 65 75 85 95 105 115 125 135 145 155 165 185 >185

0

5

10

15

20

25

30

%

o

f

S

a

m

p

l

e

Share Prices (Midpoint)

Histogram of NYSE Share Prices

NYSE Matched Sample (221 firms) All NYSE (1904 firms)

5 15 25 35 45 55 65 75 85 95 105 115 125 135 145 155 165 175 185 >185

0

5

10

15

20

25

30

35

40

45

50

%

o

f

S

a

m

p

l

e

Share Prices (Midpoint)

Histogram of NASD Share Prices

NASD Matched Sample (221 firms) All NASD (4341 firms)
B9

5 1 5 2 5 3 5 4 5 5 5 6 5 7 5 8 5 9 5 1 0 5 1 1 5 1 2 5 1 3 5 1 4 5 1 5 5 1 6 5 1 8 5 >18 5

0

5

1 0

1 5

2 0

2 5

3 0

%

o

f

S

a

m

p

l

e

Share Prices (M idpo int )

H istogra m o f NYSE o f Share Pr ice s

NYSE Ma tched Samp le (58 fir m s ) A ll NYSE (1904 fir m s )

5 15 25 35 45 55 65 75 85 95 105 115 125 135 145 155 165 175 >185

0

5

10

15

20

25

30

35

40

45

50

%

o

f

S

a

m

p

l

e

Share Prices (Midpoint)

Histogram of NASD Share Prices

NASD Matched Sample (58 firms) All NASD (4341 firms)
B10

5 15 25 35 45 55 65 75 85 95 105 115 125 135 145 155 165 175 >185

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

%

o

f

S

a

m

p

l

e

Share Prices (Midpoint)

Histogram of NASD/NYSE Share Prices

All NYSE (1904 firms) All NASD (4341 firms)

5 15 25 35 45 55 65 75 85 95 105 115 125 135 145 155 165 185 >185

0

5

10

15

20

25

30

35

%

o

f

S

a

m

p

l

e

Share Prices (Midpoint)

Histogram of Share Prices NYSE v. NASD

NASD Matched Sample (58 firms) NYSE Matched Sample (58 firms)
B11

5 15 25 35 45 55 65 75 85 95 105 115 125 135 145 155 165 175 185 >185

0

5

10

15

20

25

30

%

o

f

S

a

m

p

l

e

Share Prices (Midpoint)

Histogram of Share Prices NYSE v. NASD

NYSE Matched Sample (221 firms) NASD Matched Sample (221 firms)
C1

Appendix C: OATS Execution Prices

Procedures to Match Executed OATS Records to ACT Trade Reports

The execution price of an order does not exist in the OATS data files. The OATS

data was structured so that execution price could be obtained from the NASD ACT file, a

separate data base that contains reported trade information. “One of the primary

requirements of OATS is the ability to link orders with trades reported in ACT.”

42 We

obtained the ACT file and successfully matched approximately 65% of the executed OATS

records using the matching algorithms as designed by the NASD. The remaining 35% of

the OATS records did not match to the ACT file using the standard match procedure. This

appendix documents formatting changes and algorithms we developed to match additional

OATS records to the ACT file. Approximately 94% of the OATS records representing

97% of the executed OATS share volume were ultimately matched. Table C1 of this

Appendix shows the number and percent of orders matched in each iteration of our match

process and Table C3 presents match rates for both market and limit orders. SelectNet

orders were matched using a different set of procedures that are described in the last

section of this Appendix and the results are presented in Table C2.

The OATS records link to the ACT files based on a set of five variables that

uniquely identify the executed OATS order: execution date, issue symbol, reporting

market-maker, execution time to the second, and branch sequence number.43 The branch

sequence number is an eight-character alphanumeric variable reported on both files and

identifies a particular order. The standard match procedure requires that the files match

exactly on each of these five fields.

The ACT file contains records of all Nasdaq executions subject to trade reporting

as well as records reported for clearing purposes only. 44 The trade file also includes

records for proprietary, desk orders and other trades not subject to OATS reporting. All

trade records on the file, including clearing only records were used in the matching

process. If the execution time was missing on the trade file the report time was used.

Report time is the time the trade was reported to the ACT system.

For some trades, the ACT file also contains the identification of the marketmaker/broker-dealer who was the counter party to the trade and the counter party branch

sequence number. OATS records that did not match to the reporting side information on

the ACT file were matched to the counter party side of the ACT data. The counter side

broker identification and counter side branch sequence fields replaced the reporting side

 

42 OATS Reporting Technical Specification, July 29, 1999 Edition, Section 4-7, NASD Regulation.

43 OATS Reporting Technical Specification, July 29, 1999 Edition, Section 6-5, NASD Regulation.

44 The trade file includes records for publicly reported trades and clearing-only records. Clearing

records are reported for odd-lot transactions that are not publicly reported, and for some ECN

executions in addition to the public trade report. The trade file has information on the executed

quantity, reporting and contra side broker, buy/sell indicator, execution time, report time to ACT,

executed price, but has no order information such as order time, market or limit indicator, limit

price, order quantity or originating broker.
C2

fields for the match. The reporting side execution time was used for the match. Less than

1% of matches were added using the counter side information.

Routed orders are sent from one market center to another for execution and

generate a routing record in addition to a new order record. (This description does not

apply to SelectNet routed orders). The new order record produced by the second market

center contains the information necessary for the standard matching process. The first or

routed record does not. This information was attached to the routed order report and then

matched to the trade file. The match process uses the sent_to field instead of the mp_id

field on the OATS file to obtain a correct match. The standard firm variable match

procedure was used for these records. These orders are included in Table C1 and represent

about 3% of the total executed OATS records.

Our review of the unmatched OATS records showed that many records were failing

to match due to differences in the formatting of the branch sequence number on the OATS

and ACT files. We determined that reformatting the branch sequence numbers, and making

two market center specific adjustments would result in additional matches with no loss in

accuracy. Generally, the formatting corrections affected the trade file, although the

adjustments were applied to branch sequence numbers on both the OATS and the trade

files. The formatting corrections that we implemented are as follows:

1. The branch sequence number for a trade has a blank in middle of the string on one file

but no blank in the other file. The branch sequence numbers were compressed to delete

the blank in the middle of the strings.

Before (file 1) abcd 123

 (file 2) abcd123

After correction abcd123

2. Trailing zeros on the Branch Sequence on one file but not on the other file.

 Before (file 1) abcd1200

(file 2) abcd12

After correction (both files) abcd12

3. Market Center N1 Correction: Branch sequence numbers with a blank in middle of a

string followed by leading zeros in positions 5, 6, and/or 7. Corresponding record has no

blank or zeroes, or has different number of zeroes. This and formatting adjustments 1

and 2 increased the match rate from 64.6% to 75.8%.

Before (file 1) abcd 004, abcd 04, etc.

 (file 2) abcd04 or abcd4

After Correction (both files) abcd4

4. Market Center N2 Correction: For this market center, there sometimes were two OATS

orders with different branch sequence numbers that execute against each other but

generate only one matching report on the trade file. The two OATS branch sequence
C3

numbers are identical except for the last character, which is ‘s’ on one order and ‘b’ on

the other. The corresponding trade record has a branch sequence number that matches

one of the OATS records. We allowed the trade record to match with both of the OATS

records. The correction was made by stripping the ‘b’ and ‘s’ from the branch sequence

number for this firms records for this specific iteration of the match process. This

adjustment increased the percent of matched OATS records from 76.5% to 87.8%.

OATS Branch Seq 1st ord. abcd123b

 2nd ord. abcd123s

Trade Report Branch Seq abcd123b

Other Procedures to Match

In the next phase, the unmatched OATS records are matched to the trade file by

adding and deleting (for purposes of matching) variables from the standard five variable

set (see summary table below). ACT trade records that previously matched with OATS

records were excluded for the remaining match process. In this phase, orders and trades

were matched only when there was one observation as defined by the matching criteria.

For example, if there were multiple observations with identical, date, stock symbol, market

center, branch sequence number and executed quantity on either the OAT or ACT file, the

match was not attempted for the records. In requiring that records be unique, we protect

against selecting an incorrect match when there is more than one record to choose from.

The three steps in this phase are described below.

First, execution time was dropped and executed quantity was substituted as a match

variable. The other standard variables, date, symbol, market center, and branch sequence

were retained as matching variables. This step increased the match rate from 87.8% to

88.5%.

In the second step, the branch sequence number was dropped as a match variable

and the match was rerun using same variables as step one. For a successful match, the

OATS record had to match the trade file on the basis of date, stock, market center,

execution time to the second, and the share quantity executed. In addition, trades

previously used in earlier iterations were not available for the match. This process

increased the match rate of executed OATS records from 88.5% to 89.9%.

The third step is identical to step 2, except that the matches are permitted when

execution times are within the same half-minute. Execution times in the first half-minute

are rounded to the earlier minute, and execution times in the second half-minute are

rounded to the next minute. This allows, for example, a record with a 10:00:01 time to

match with a 10:00:29 record when each of the other variables also match. This increased

the match rate from 89.9% to 90.6%.45

 

45 A final step dropped the market center from the matching algorithm and produced 59 additional

matches for the entire week.
C4

Summary of Other Match Procedures

Date, Stock,

Market Center

Branch

Sequence

Execution Time Quantity

Executed

Standard

Method Uses

Y Y Y N

Step1 Y Y N Y

Step 2 Y N Y Y

Step 3 Y N Y (Approx. Time) Y

Matching Orders Routed Through SelectNet

OATS orders routed through SelectNet have no information on the status of the

order, and do not have the execution time or quantity for orders that do execute. Unlike

orders routed through non-Nasdaq systems, SelectNet orders do not generate a second

order report from the receiving market center. Therefore, the routed SelectNet order is the

only record for these orders. According to the NASD, the OATS SelectNet orders can be

matched to the ACT file using the routed order identification that appears in the OATS file

instead of the branch sequence number.

After removing trailing zeros and blanks from the routed order number, the OATS

SelectNet orders were matched to the ACT file based on routed order number, date, stock

symbol, and market center (no execution time). Approximately 13% of the SelectNet

OATS records matched to its corresponding trade on the ACT file. Since OATS does not

indicate if routed SelectNet orders were executed, the percent of executed orders that we

successfully matched is unknown.

In order to determine the status of the remaining SelectNet orders, and to attach the

execution information to executed orders, we requested the SelectNet order and response

files from the NASD for the 221 sample stocks. These two sets of files contain SelectNet

order and SelectNet execution information, and include orders that are not OATS

reportable events. The SelectNet order and response files were merged together by date

and order identification number. However, the NASD SelectNet data has no fields to

directly link it to the OATS SelectNet records. We developed algorithms to match the

OATS and SelectNet files which are described below. The results of the match are

presented in Table C2 of this Appendix.

The criteria utilized to match records were as follows: date, market center, stock

symbol, buy/sell indicator, quantity, order time, and for limit orders the limit price. The

OATS records have both the order receive time and time the order was sent to SelectNet.

The SelectNet files contain the time the order was received by SelectNet. However, since

the SelectNet time stamp sometimes precedes the OATS time sent by a few seconds, the

OATS time receive time was used for the match. Beginning with the OATS time received,

the first SelectNet record within 60 seconds, to match on each of the above criteria was

selected. If a SelectNet order that matched each of the criteria was not found with a time

that was within 60 seconds of the OATS time, the record did not match.
C5

In the second iteration of this process, matches were permitted if for buy (sell) limit

orders, the SelectNet price was equal to or less (greater) than the OATS limit price. The

step allows for matches with unequal prices since SelectNet orders sometimes contain a

price that is revised from the original OATS price. Once used for a match, the SelectNet

order was removed and was not available for further matches.

Approximately 73% of the OATS records routed to SelectNet were successfully

matched to the SelectNet file. Executed orders represented 38% of the OATS SelectNet

orders and unexecuted orders represented 35%. OATS SelectNet records that did not

match and therefore their status is unknown, accounted for 26% of the records.
C6

Table C1: Results of Match Process for June 5-9, 2000 221 Stock Sample Data

OATS

Orders that

Match with

Trade File

 (a)

Cumulative

Number of

Matches

 (b)

Total

Number of

Executed

Oats

Records *

 (c)

Matched

OATS

Records as

% of Total

 (b)/(c)

No adjustments Standard

Merge Process(Includes

Non-SelectNet Routed

Orders)

1,826,865 1,826,865 2,828,071 64.6%

Remove blanks, trailing 0s,

and specific reformatting

for Market Center N1

316,449 2,143,314 2,828,071 75.8%

Match OATS with Contra

Side Info. on ACT File 21,304 2,164,617 2,828,071 76.5%

Market Center N2 Branch

Sequence Adjustment

(match 1 trade print to 2

OATS orders)

319,650 2,484,268 2,828,071 87.8%

Execution Time Dropped

and Execution Qty Added

as Match Variables

19,953 2,504,221 2,828,071 88.5%

Branch Seq Dropped, Date,

Stock, MP_ID, Xtime,

QTY are Match Variables

37,158 2,541,379 2,828,071 89.9%

Time to 30 seconds

Replaces Exact Time 22,106 2,563,485 2,828,071 90.6%

Same as Above, Drop

MP_ID, Add Branch

Sequence

59 2,563,544 2,828,071 90.6%

Total 2,563,544 2,828,071 90.6%

Total A ** - 2,307,408 2,457,702 93.9%

*Included are 91,544 routed order records from market-makers and orders routed to ECN’s, excluding SelectNet.

**Excludes odd lots, and orders with exception reports or special handling codes.
C7

Table C2: Selectnet Orders Results of Match Process, 221 Stock Sample

OATS Orders

that:

Number

(a)

Cumulative

Total

(b)

Total

Number of

OATS

SelectNet

Orders

(c)

Number as

% of

Total

OATS

SelectNet

Orders

(a/c)

Cum Total

as %

(b/c)

Matched to the

SelectNet or

ACT File and

Executed * 119,619 119,619 313,053 38.2% 38.2%

Matched to

SelectNet File

but did not

Execute 109,904 229,523 313,053 35.1% 73.3%

Did not match –

Disposition

Unknown 80,531 310,054 313,053 25.7% 99.0%

Matched as

Partial

Executions - no

execution price

on SelectNet

File (199 stock

sample only)

2,999 313,053 313,053 1.0% 100%

* Approximately 13% of the OATS orders matched to the ACT file using the routed order identification. For the 199

stock sample, orders that matched to either the ACT file or the SelectNet file are included. For the 22 stocks added later,

the sample includes those OATS orders that matched to the SelectNet files.
C8

Table C3: Match Rate by Order Type – Corresponds to Table C1 Total A

(Excludes Orders Routed to Nasdaq Execution Systems) June 5-9, 2000, Sample of 221

Number of

Orders

Matched

Total Number

of Orders

% Matched % of

Executed

Volume

Matched

Market Orders 543,017 555,234 97.8% 99.1%

Limit Orders 1,764,391 1,902,468 92.7% 96.1%

Total 2,307,408 2,457,702 93.9% 96.7%
Appendix D: Summary of Executed Orders and Executed Shares
Appendix D. Summary of Executed Orders and Executed Shares

Firms in All Size Categories

Market Orders Total Ord. Typ. All Ords. Total Ord. Typ. All Ords. Total Ord. Typ. All Ords. Total Ord. Typ. All Ords.

100-499 Shares 1,341 71.1% 21.2% 249,775 27.9% 6.6% 653 54.1% 26.2% 124,053 11.5% 4.0% 

500-199 Shares 477 25.3% 7.5% 366,481 40.9% 9.6% 425 35.2% 17.1% 342,444 31.7% 10.9% 

2000-4999 Shares 54 2.9% 0.9% 135,022 15.1% 3.5% 93 7.7% 3.7% 238,984 22.1% 7.6% 

5000+ Shares 15 0.8% 0.2% 144,096 16.1% 3.8% 37 3.1% 1.5% 374,687 34.7% 12.0% 

Total Market Orders 1,887 100.0% 29.9% 895,373 100.0% 23.5% 1,208 100.0% 48.5% 1,080,167 100.0% 34.5% 

Marketable Limit Orders

100-499 Shares 1,141 48.8% 18.1% 209,700 13.3% 5.5% 155 32.9% 6.2% 31,603 3.7% 1.0% 

500-199 Shares 1,009 43.2% 16.0% 716,819 45.6% 18.8% 193 41.2% 7.8% 167,483 19.4% 5.3% 

2000-4999 Shares 126 5.4% 2.0% 258,306 16.4% 6.8% 72 15.4% 2.9% 186,200 21.6% 5.9% 

5000+ Shares 61 2.6% 1.0% 387,690 24.7% 10.2% 49 10.4% 2.0% 475,992 55.3% 15.2% 

At the Quote Limit Orders

100-499 Shares 369 53.4% 5.8% 61,127 18.6% 1.6% 147 41.4% 5.9% 29,436 6.8% 0.9% 

500-199 Shares 290 41.9% 4.6% 184,003 56.1% 4.8% 147 41.5% 5.9% 120,179 27.6% 3.8% 

2000-4999 Shares 23 3.4% 0.4% 40,081 12.2% 1.1% 39 11.1% 1.6% 98,270 22.6% 3.1% 

5000+ Shares 9 1.3% 0.1% 42,754 13.0% 1.1% 21 5.9% 0.8% 187,449 43.1% 6.0% 

Inside the Quote Limit Orders

100-499 Shares 535 48.9% 8.5% 96,523 12.0% 2.5% 155 39.4% 6.2% 29,788 4.7% 1.0% 

500-199 Shares 468 42.7% 7.4% 346,605 43.1% 9.1% 151 38.6% 6.1% 134,090 21.1% 4.3% 

2000-4999 Shares 57 5.2% 0.9% 123,337 15.3% 3.2% 53 13.4% 2.1% 138,621 21.8% 4.4% 

5000+ Shares 35 3.2% 0.6% 238,525 29.6% 6.3% 34 8.6% 1.4% 332,154 52.3% 10.6% 

Near the Quote Limit Orders

100-499 Shares 158 52.1% 2.5% 28,436 13.9% 0.7% 25 38.3% 1.0% 4,504 3.8% 0.1% 

500-199 Shares 123 40.6% 2.0% 91,219 44.5% 2.4% 25 38.7% 1.0% 22,023 18.5% 0.7% 

2000-4999 Shares 15 4.8% 0.2% 31,845 15.5% 0.8% 9 13.7% 0.4% 22,783 19.1% 0.7% 

5000+ Shares 7 2.5% 0.1% 53,513 26.1% 1.4% 6 9.3% 0.2% 69,965 58.7% 2.2% 

Total Limit Orders 4,427 70.1% 2,910,485 76.5% 1,282 51.5% 2,050,541 65.5% 

Grand Total 6,313 3,805,858 2,490 3,130,708

Percent of... Percent of... Percent of... Percent of...

Nasdaq NYSE

Executed Orders (000's) Executed Shares (000's) Executed Orders (000's) Executed Shares (000's)

D1
Appendix D. Summary of Executed Orders and Executed Shares

Firms in Very Large Size Category

Market Orders Total Ord. Typ. All Ords. Total Ord. Typ. All Ords. Total Ord. Typ. All Ords. Total Ord. Typ. All Ords.

100-499 Shares 1,144 72.2% 21.6% 212,803 29.0% 6.7% 495 54.7% 28.4% 93,295 11.3% 4.2% 

500-199 Shares 387 24.4% 7.3% 296,003 40.4% 9.3% 310 34.3% 17.8% 250,005 30.3% 11.2% 

2000-4999 Shares 41 2.6% 0.8% 102,831 14.0% 3.2% 70 7.7% 4.0% 179,169 21.7% 8.1% 

5000+ Shares 12 0.7% 0.2% 121,437 16.6% 3.8% 30 3.4% 1.7% 301,724 36.6% 13.6% 

Total Market Orders 1,584 100.0% 29.9% 733,074 100.0% 23.1% 905 100.0% 51.9% 824,194 100.0% 37.1% 

Marketable Limit Orders

100-499 Shares 953 48.6% 18.0% 175,914 13.4% 5.6% 98 32.5% 5.6% 20,073 3.5% 0.9% 

500-199 Shares 859 43.9% 16.2% 611,061 46.5% 19.3% 124 41.1% 7.1% 107,778 18.9% 4.8% 

2000-4999 Shares 99 5.1% 1.9% 205,073 15.6% 6.5% 47 15.7% 2.7% 123,526 21.6% 5.6% 

5000+ Shares 48 2.4% 0.9% 321,121 24.5% 10.1% 32 10.7% 1.8% 320,386 56.0% 14.4% 

At the Quote Limit Orders

100-499 Shares 292 52.8% 5.5% 47,767 18.9% 1.5% 84 39.7% 4.8% 17,118 6.0% 0.8% 

500-199 Shares 240 43.4% 4.5% 152,244 60.1% 4.8% 89 41.9% 5.1% 73,001 25.7% 3.3% 

2000-4999 Shares 16 2.9% 0.3% 26,811 10.6% 0.8% 25 11.7% 1.4% 63,124 22.2% 2.8% 

5000+ Shares 5 0.9% 0.1% 26,524 10.5% 0.8% 14 6.7% 0.8% 131,151 46.1% 5.9% 

Inside the Quote Limit Orders

100-499 Shares 446 48.4% 8.4% 80,374 11.7% 2.5% 109 39.7% 6.2% 20,953 4.7% 0.9% 

500-199 Shares 402 43.5% 7.6% 298,505 43.5% 9.4% 106 38.5% 6.1% 93,932 21.0% 4.2% 

2000-4999 Shares 47 5.0% 0.9% 101,495 14.8% 3.2% 37 13.4% 2.1% 97,671 21.8% 4.4% 

5000+ Shares 28 3.1% 0.5% 205,924 30.0% 6.5% 23 8.3% 1.3% 234,851 52.5% 10.6% 

Near the Quote Limit Orders

100-499 Shares 142 52.3% 2.7% 25,215 13.9% 0.8% 20 38.8% 1.2% 3,666 3.8% 0.2% 

500-199 Shares 110 40.8% 2.1% 81,518 45.1% 2.6% 20 38.1% 1.1% 17,540 18.2% 0.8% 

2000-4999 Shares 12 4.6% 0.2% 26,911 14.9% 0.8% 7 13.8% 0.4% 18,492 19.1% 0.8% 

5000+ Shares 6 2.3% 0.1% 47,243 26.1% 1.5% 5 9.3% 0.3% 56,869 58.9% 2.6% 

Total Limit Orders 3,706 70.1% 2,433,699 76.9% 840 48.1% 1,400,129 62.9% 

Grand Total 5,290 3,166,773 1,745 2,224,323

Percent of... Percent of... Percent of... Percent of...

Nasdaq NYSE

Executed Orders (000's) Executed Shares (000's) Executed Orders (000's) Executed Shares (000's)

D2
Appendix D. Summary of Executed Orders and Executed Shares

Firms in Large Size Category

Market Orders Total Ord. Typ. All Ords. Total Ord. Typ. All Ords. Total Ord. Typ. All Ords. Total Ord. Typ. All Ords.

100-499 Shares 115 75.1% 19.5% 20,482 31.6% 7.1% 110 53.7% 24.3% 21,318 13.5% 4.7% 

500-199 Shares 33 21.6% 5.6% 24,836 38.3% 8.6% 77 37.4% 16.9% 61,015 38.7% 13.6% 

2000-4999 Shares 4 2.5% 0.6% 9,370 14.4% 3.2% 15 7.2% 3.3% 37,345 23.7% 8.3% 

5000+ Shares 1 0.8% 0.2% 10,181 15.7% 3.5% 3 1.7% 0.8% 37,920 24.1% 8.4% 

Total Market Orders 153 100.0% 26.0% 64,869 100.0% 22.4% 205 100.0% 45.3% 157,598 100.0% 35.1% 

Marketable Limit Orders

100-499 Shares 132 57.9% 22.4% 22,830 19.5% 7.9% 34 36.1% 7.6% 7,118 5.6% 1.6% 

500-199 Shares 80 35.0% 13.5% 52,265 44.5% 18.1% 40 42.7% 8.9% 34,299 27.1% 7.6% 

2000-4999 Shares 9 4.0% 1.5% 17,263 14.7% 6.0% 13 14.1% 3.0% 32,078 25.4% 7.1% 

5000+ Shares 7 3.0% 1.2% 24,977 21.3% 8.6% 7 7.0% 1.5% 52,908 41.9% 11.8% 

At the Quote Limit Orders

100-499 Shares 58 62.6% 9.9% 9,573 24.0% 3.3% 40 47.2% 8.8% 7,805 9.6% 1.7% 

500-199 Shares 30 32.2% 5.1% 17,173 43.1% 5.9% 34 39.7% 7.4% 26,761 32.9% 6.0% 

2000-4999 Shares 3 3.1% 0.5% 5,131 12.9% 1.8% 8 8.9% 1.7% 18,046 22.2% 4.0% 

5000+ Shares 2 2.2% 0.3% 7,990 20.0% 2.8% 4 4.1% 0.8% 28,745 35.3% 6.4% 

Inside the Quote Limit Orders

100-499 Shares 58 59.3% 9.9% 10,002 17.3% 3.5% 28 45.6% 6.1% 5,318 7.2% 1.2% 

500-199 Shares 33 33.2% 5.6% 22,374 38.6% 7.7% 23 37.6% 5.0% 19,518 26.3% 4.3% 

2000-4999 Shares 4 4.0% 0.7% 8,236 14.2% 2.8% 6 10.6% 1.4% 16,642 22.4% 3.7% 

5000+ Shares 3 3.4% 0.6% 17,370 30.0% 6.0% 4 6.2% 0.8% 32,680 44.1% 7.3% 

Near the Quote Limit Orders

100-499 Shares 10 61.8% 1.7% 1,836 20.3% 0.6% 3 42.2% 0.7% 609 6.4% 0.1% 

500-199 Shares 5 31.8% 0.9% 3,433 38.0% 1.2% 3 40.8% 0.7% 2,651 27.8% 0.6% 

2000-4999 Shares 1 3.5% 0.1% 1,185 13.1% 0.4% 1 11.2% 0.2% 2,184 22.9% 0.5% 

5000+ Shares 0 2.9% 0.1% 2,570 28.5% 0.9% 0 5.8% 0.1% 4,081 42.9% 0.9% 

Total Limit Orders 436 74.0% 224,208 77.6% 248 54.7% 291,442 64.9% 

Grand Total 589 289,077 453 449,040

Percent of... Percent of... Percent of... Percent of...

Nasdaq NYSE

Executed Orders (000's) Executed Shares (000's) Executed Orders (000's) Executed Shares (000's)

D3
Appendix D. Summary of Executed Orders and Executed Shares

Firms in Medium Size Category

Market Orders Total Ord. Typ. All Ords. Total Ord. Typ. All Ords. Total Ord. Typ. All Ords. Total Ord. Typ. All Ords.

100-499 Shares 63 56.9% 19.0% 12,602 18.4% 5.3% 34 48.6% 16.7% 6,588 9.5% 2.2% 

500-199 Shares 40 36.4% 12.2% 32,064 46.8% 13.4% 27 39.6% 13.6% 22,256 32.3% 7.3% 

2000-4999 Shares 6 5.6% 1.9% 15,113 22.1% 6.3% 6 8.6% 3.0% 16,062 23.3% 5.3% 

5000+ Shares 1 1.2% 0.4% 8,691 12.7% 3.6% 2 3.2% 1.1% 24,102 34.9% 7.9% 

Total Market Orders 110 100.0% 33.5% 68,470 100.0% 28.5% 69 100.0% 34.3% 69,008 100.0% 22.7% 

Marketable Limit Orders

100-499 Shares 47 40.6% 14.1% 8,912 9.5% 3.7% 16 31.5% 7.8% 3,044 2.8% 1.0% 

500-199 Shares 53 46.1% 16.0% 39,322 41.8% 16.4% 20 40.1% 10.0% 17,292 16.2% 5.7% 

2000-4999 Shares 11 10.0% 3.5% 23,330 24.8% 9.7% 8 15.4% 3.8% 20,088 18.8% 6.6% 

5000+ Shares 4 3.3% 1.2% 22,487 23.9% 9.4% 7 13.1% 3.3% 66,637 62.2% 21.9% 

At the Quote Limit Orders

100-499 Shares 15 44.4% 4.7% 3,026 12.7% 1.3% 18 42.5% 8.7% 3,447 7.2% 1.1% 

500-199 Shares 15 43.9% 4.6% 10,840 45.3% 4.5% 17 41.1% 8.4% 13,917 28.9% 4.6% 

2000-4999 Shares 3 7.8% 0.8% 4,985 20.9% 2.1% 4 10.6% 2.2% 11,117 23.1% 3.7% 

5000+ Shares 1 3.9% 0.4% 5,054 21.1% 2.1% 2 5.8% 1.2% 19,613 40.8% 6.4% 

Inside the Quote Limit Orders

100-499 Shares 25 43.9% 7.6% 4,927 11.6% 2.1% 12 32.6% 6.1% 2,418 3.4% 0.8% 

500-199 Shares 26 44.8% 7.7% 19,361 45.6% 8.1% 15 39.6% 7.4% 13,491 18.8% 4.4% 

2000-4999 Shares 4 7.4% 1.3% 8,915 21.0% 3.7% 6 15.6% 2.9% 15,679 21.8% 5.2% 

5000+ Shares 2 3.8% 0.7% 9,283 21.8% 3.9% 5 12.2% 2.3% 40,322 56.1% 13.3% 

Near the Quote Limit Orders

100-499 Shares 5 41.6% 1.6% 1,151 10.4% 0.5% 1 27.2% 0.4% 164 2.0% 0.1% 

500-199 Shares 6 46.3% 1.8% 4,826 43.5% 2.0% 1 40.2% 0.7% 1,190 14.5% 0.4% 

2000-4999 Shares 1 8.6% 0.3% 2,370 21.4% 1.0% 1 17.9% 0.3% 1,489 18.1% 0.5% 

5000+ Shares 0 3.5% 0.1% 2,752 24.8% 1.1% 0 14.7% 0.2% 5,388 65.5% 1.8% 

Total Limit Orders 219 66.5% 171,542 71.5% 133 65.7% 235,296 77.3% 

Grand Total 330 240,012 202 304,304

Percent of... Percent of... Percent of... Percent of...

Nasdaq NYSE

Executed Orders (000's) Executed Shares (000's) Executed Orders (000's) Executed Shares (000's)

D4
Appendix D. Summary of Executed Orders and Executed Shares

Firms in Small Size Category

Market Orders Total Ord. Typ. All Ords. Total Ord. Typ. All Ords. Total Ord. Typ. All Ords. Total Ord. Typ. All Ords.

100-499 Shares 19 48.1% 17.9% 3,888 13.4% 3.5% 14 50.3% 16.1% 2,851 9.7% 1.9% 

500-199 Shares 17 42.4% 15.8% 13,578 46.9% 12.3% 11 38.2% 12.2% 9,169 31.2% 6.0% 

2000-4999 Shares 3 8.1% 3.0% 7,707 26.6% 7.0% 2 8.4% 2.7% 6,407 21.8% 4.2% 

5000+ Shares 1 1.5% 0.5% 3,787 13.1% 3.4% 1 3.1% 1.0% 10,941 37.3% 7.1% 

Total Market Orders 39 100.0% 37.2% 28,960 100.0% 26.3% 28 100.0% 32.0% 29,367 100.0% 19.2% 

Marketable Limit Orders

100-499 Shares 10 27.6% 9.3% 2,044 4.3% 1.9% 7 28.2% 7.4% 1,368 2.4% 0.9% 

500-199 Shares 17 48.4% 16.3% 14,172 29.5% 12.9% 9 38.9% 10.2% 8,113 14.5% 5.3% 

2000-4999 Shares 6 16.2% 5.4% 12,639 26.4% 11.5% 4 17.8% 4.6% 10,508 18.7% 6.9% 

5000+ Shares 3 7.8% 2.6% 19,105 39.8% 17.4% 4 15.1% 4.0% 36,060 64.3% 23.6% 

At the Quote Limit Orders

100-499 Shares 4 35.4% 3.5% 761 7.0% 0.7% 5 31.1% 5.7% 1,066 5.0% 0.7% 

500-199 Shares 5 44.6% 4.4% 3,746 34.5% 3.4% 8 47.0% 8.6% 6,500 30.2% 4.2% 

2000-4999 Shares 1 13.8% 1.4% 3,154 29.1% 2.9% 3 15.8% 2.9% 5,983 27.8% 3.9% 

5000+ Shares 1 6.2% 0.6% 3,186 29.4% 2.9% 1 6.1% 1.1% 7,940 36.9% 5.2% 

Inside the Quote Limit Orders

100-499 Shares 6 33.7% 5.3% 1,219 6.7% 1.1% 6 29.3% 6.4% 1,099 2.7% 0.7% 

500-199 Shares 8 46.8% 7.4% 6,365 34.9% 5.8% 8 40.1% 8.7% 7,149 17.4% 4.7% 

2000-4999 Shares 2 12.8% 2.0% 4,692 25.7% 4.3% 3 17.3% 3.8% 8,630 21.0% 5.6% 

5000+ Shares 1 6.8% 1.1% 5,948 32.6% 5.4% 3 13.3% 2.9% 24,301 59.0% 15.9% 

Near the Quote Limit Orders

100-499 Shares 1 29.4% 1.0% 234 5.8% 0.2% 0 24.0% 0.4% 66 1.3% 0.0% 

500-199 Shares 2 49.2% 1.6% 1,441 36.0% 1.3% 1 44.3% 0.8% 643 13.0% 0.4% 

2000-4999 Shares 1 16.3% 0.5% 1,379 34.5% 1.3% 0 15.9% 0.3% 619 12.5% 0.4% 

5000+ Shares 0 5.1% 0.2% 948 23.7% 0.9% 0 15.9% 0.3% 3,626 73.2% 2.4% 

Total Limit Orders 66 62.8% 81,036 73.7% 61 68.0% 123,674 80.8% 

Grand Total 105 109,996 89 153,041

Percent of... Percent of... Percent of... Percent of...

Nasdaq NYSE

Executed Orders (000's) Executed Shares (000's) Executed Orders (000's) Executed Shares (000's)

D5
E1

Appendix E: NYSE Listing Requirements

Criteria Requirements Worldwide

North

American

Or Domestic

Distribution Round-Lot Holders

Public Shares

Public Market Value

 IPO’s, Carve-Outs, Spin-Offs & Affiliates

 All Other Listings

5,000

2.5 M

$100 M

2,000

1.1 M

$60 M

$100 M

Financial either Alternative #1-Income Standard*

 Pre-Tax Income

 Most Recent Yr

 Each of the 2 Preceding Yrs

 Aggregate for Last 3 Yrs

 Minimum

 Minimum in Each of the Most Recent 2 Yrs

 Minimum in the Most Recent Yr.

 (All 3 Yrs Must be Profitable)

$100 M

$25 M

$2.5 M

$2.0 M

OR

$6.5 M

$4.5 M

or Alternative #2-Cash Flow Standard*

 Market Cap.

 Revenues (Most Recent 12 Months Period)

 Aggregate Operating Cash Flow for Last 3 Yrs

 Each of the Most Recent 3 Yrs

 Minimum in Each of the Most Recent 2 Yrs

$500 M

$200 M

$100 M

$25 M

$500 M

$200 M

$25 M

Positive

or Alternative #3-Global Market Capitalization

Standard

 Market Cap. (Avg. of the Last 6 Months or IPO

Valuation)

 Revenues (Most Recent Fiscal Yr)

$1 B

$100 M

$1 B

$100 M

or Alternative #4 -- Affiliated Company Standard

 (for affiliates of NYSE listed companies in good

standing with:)

 Market Cap.

 12 Months Operating History – Not Necessarily

Separate Corporate Entity

 Parent Company control (20% or more of

equity) or significant influence

 No Specific Profit, Cashflow nor Revenue

hurdle

Minimum

$500 M

Minimum

$500 M
F1

Appendix F: Matched Pairs

Nasdaq Stock

NYSE Stock

Ticker

Symbols

Market

Cap. (Mils)

Share

Price

Return

Volatility

Adj. Dollar

Vol. (Mils)

Very Large, close matches

3COM CORP

BEST BUY COMPANY INC

COMS

BBY

17991

12841

51.28

62.44

0.0924

0.0954

149.8

141.9

AMGEN INC

CHASE MANHATTAN CORP NEW

AMGN

CMB

64335

60444

62.66

73.34

0.0695

0.0594

296.0

286.6

APPLE COMPUTER INC

TERADYNE INC

AAPL

TER

15578

15622

95.72

91.31

0.0825

0.1053

194.0

136.2

COMCAST CORP

GAP INC

CMCSK

GPS

31977

28099

36.59

33.00

0.0671

0.0698

118.0

100.2

MCI WORLDCOM INC

A T & T CORP

WCOM

T

120696

109740

42.16

34.34

0.0554

0.0563

533.7

465.4

Very Large, other matches

AMAZON COM INC

L S I LOGIC CORP

AMZN

LSI

18347

18414

52.16

61.91

0.1444

0.0945

147.8

152.4

APPLIED MATERIALS INC

MICRON TECHNOLOGY INC

AMAT

MU

71875

41122

94.97

80.94

0.0884

0.1053

612.4

460.6

BROADVISION INC

NATIONAL SEMICONDUCTOR

CORP

BVSN

NSM

12839

11267

51.38

65.69

0.1621

0.1051

235.3

211.9

C M G I INC

ADVANCED MICRO DEVICES INC

CMGI

AMD

16498

13101

61.00

88.56

0.1722

0.1011

213.2

304.5

CIENA CORP

CORNING INC

CIEN

GLW

19577

51900

139.88

212.13

0.1512

0.0795

515.8

426.8

CISCO SYSTEMS INC

LUCENT TECHNOLOGIES INC

CSCO

LU

443837

187329

64.41

59.66

0.0665

0.0736

1391.4

630.2

DELL COMPUTER CORP

NORTEL NETWORKS CORP

DELL

NT

116485

161734

45.03

59.22

0.0795

0.0821

652.4

540.7

INTEL CORP

INTERNATIONAL BUSINESS

MACH

INTC

IBM

424747

215674

127.09

119.75

0.0644

0.0532

1682.0

726.1

J D S UNIPHASE CORP

HEWLETT PACKARD CO

JDSU

HWP

65963

130019

110.59

127.88

0.1010

0.0644

1028.2

481.7

MICROSOFT CORP

CITIGROUP INC

MSFT

C

362284

216029

68.84

64.00

0.0613

0.0595

1761.9

403.5

NEXTEL COMMUNICATIONS INC

ELECTRONIC DATA SYSTEMS

COR

NXTL

EDS

20721

20254

57.34

43.06

0.0941

0.0666

241.5

255.1

ORACLE CORP

AMERICA ONLINE INC

ORCL

AOL

234701

123621

82.69

54.84

0.0975

0.1090

1065.3

423.5
F2

Nasdaq Stock

NYSE Stock

Ticker

Symbols

Market

Cap. (Mils)

Share

Price

Return

Volatility

Adj. Dollar

Vol. (Mils)

Very Large, other matches (continued)

P M C SIERRA INC

MERRILL LYNCH & CO INC

PMCS

MER

27377

39563

187.66

108.06

0.1139

0.0697

668.5

241.9

QUALCOMM INC

MOTOROLA INC

QCOM

MOT

58797

63515

79.34

34.78

0.1161

0.0717

1090.6

509.3

RAMBUS INC

GENERAL MOTORS CORP

RMBS

GMH

5594

13532

233.72

99.88

0.1458

0.0652

702.9

266.1

SIEBEL SYSTEMS INC

ANALOG DEVICES INC

SEBL

ADI

28799

33049

144.28

94.69

0.1075

0.0999

332.9

186.5

SUN MICROSYSTEMS INC

E M C CORP MA

SUNW

EMC

142628

141905

89.91

68.94

0.0786

0.0712

783.7

370.4

TELLABS INC

COMPUTER ASSOCIATES INTL I

TLAB

CA

27577

31853

67.34

59.09

0.0823

0.0705

162.1

124.2

VERITAS SOFTWARE CORP

TIME WARNER INC

VRTS

TWX

54082

95378

135.66

80.88

0.0974

0.0605

383.0

307.6

YAHOO INC

PROCTER & GAMBLE CO

YHOO

PG

77772

74292

143.16

56.53

0.1166

0.0565

757.4

390.2

Large, close matches

AMERICAN POWER CONVERSION CO

AVON PRODUCTS INC

APCC

AVP

7762

10149

40.13

41.84

0.0767

0.0766

49.4

38.0

COMVERSE TECHNOLOGY INC

SEAGATE TECHNOLOGY

CMVT

SEG

13523

13574

86.97

65.03

0.0810

0.0898

115.6

112.7

CUBIST PHARMACEUTICALS INC

TRITON ENERGY LTD

CBST

OIL

1045

1161

39.22

32.53

0.1346

0.1075

6.9

6.8

EMMIS COMMUNICATIONS CORP

BARRETT RESOURCES CORP

EMMS

BRR

1524

1177

37.16

36.13

0.0876

0.0807

6.4

6.7

GILEAD SCIENCES INC

TEKTRONIX INC

GILD

TEK

2962

2822

66.47

59.72

0.1046

0.0837

17.8

14.4

LAM RESH CORP

S C I SYSTEMS INC

LRCX

SCI

5198

5468

41.78

37.91

0.1184

0.0988

96.5

89.1

MEDICAL MANAGER CORP NEW

STATION CASINOS INC

MMGR

STN

1197

1211

29.38

28.72

0.1049

0.0979

7.5

5.4

MEDQUIST INC

TITAN CORP

MEDQ

TTN

1496

1795

42.22

39.41

0.0818

0.0903

15.4

17.0

NATIONAL BANCORP AK

IDEX CORP

NBAK

IEX

1169

995

38.69

33.53

0.0492

0.0560

0.4

0.4

OUTBACK STEAKHOUSE INC

HARRIS CORP

OSSI

HRS

2483

2546

31.84

31.91

0.0591

0.0570

9.3

7.2

SKY FINANCIAL GROUP INC

UNITED ASSET MGMT CORP

SKYF

UAM

1427

1184

18.47

20.16

0.0442

0.0444

1.5

2.2
F3

Nasdaq Stock

NYSE Stock

Ticker

Symbols

Market

Cap. (Mils)

Share

Price

Return

Volatility

Adj. Dollar

Vol. (Mils)

Large, close matches (continued)

SOVEREIGN BANCORP INC

HOMESTAKE MINING CO

SVRN

HM

1766

1823

7.83

7.03

0.0652

0.0683

5.2

6.6

WASHINGTON FEDERAL INC

MARK IV INDUSTRIES INC

WFSL

IV

1038

993

19.84

21.22

0.0379

0.0497

3.5

3.4

WESTERN WIRELESS CORP

CALPINE CORP

WWCA

CPN

4023

3175

56.88

50.50

0.0828

0.0874

34.8

49.4

Large, other matches

AMERITRADE HOLDING CORP

OCEAN ENERGY INC

AMTD

OEI

2063

2352

13.03

14.09

0.1862

0.0926

12.2

9.9

CENTENNIAL CELLULAR CORP

OMNICARE INC

CYCL

OCR

1642

1546

17.41

16.84

0.1044

0.0887

0.1

4.5

CREDENCE SYSTEMS CORP

COOPER CAMERON CORP

CMOS

CAM

3083

3584

62.09

66.38

0.1158

0.0923

33.7

50.9

HARMONIC INC

SMITH INTERNATIONAL INC

HLIT

SII

3236

3322

56.69

67.88

0.1305

0.0982

84.5

69.2

I D E C PHARMACEUTICALS CORP

B J SERVICES CO

IDPH

BJS

4451

4908

100.22

64.69

0.1113

0.0963

68.2

103.7

KOPIN CORP

SHARED MEDICAL SYSTEMS

CORP

KOPN

SMS

2701

1881

85.91

69.94

0.1249

0.1051

37.1

63.8

L H S GROUP INC

I C N PHARMACEUTICALS INC N

LHSG

ICN

2126

2582

35.84

33.59

0.1001

0.0981

1.0

13.4

MACROVISION CORPORATION

ROBERT HALF INTERNATIONAL I

MVSN

RHI

2657

5511

66.00

61.44

0.1181

0.0919

15.7

16.7

MERCURY INTERACTIVE CORP

LEHMAN BROTHERS HOLDINGS

IN

MERQ

LEH

6958

10257

87.47

85.53

0.1147

0.0811

83.7

82.3

MYRIAD GENETICS INC

PROVIDIAN FINANCIAL CORP

MYGN

PVN

1334

13221

127.63

93.25

0.1580

0.0941

62.5

50.2

NETEGRITY INC

THREE FIVE SYSTEMS INC

NETE

TFS

1216

1426

62.91

79.00

0.1907

0.1085

14.0

20.2

NEWPORT CORP

LEXMARK INTERNATIONAL

GROUP

NEWP

LXK

2235

9045

79.34

70.81

0.1142

0.0880

74.1

77.0

NOVELLUS SYSTEMS INC

CYPRESS SEMICONDUCTOR

CORP

NVLS

CY

7197

5621

55.09

51.19

0.1145

0.0846

76.7

67.5

REXALL SUNDOWN INC

TELEGLOBE INC

RXSD

TGO

1525

2756

23.84

22.84

0.0977

0.0793

1.4

1.4
F4

Nasdaq Stock

NYSE Stock

Ticker

Symbols

Market

Cap. (Mils)

Share

Price

Return

Volatility

Adj. Dollar

Vol. (Mils)

Large, other matches (continued)

S 1 CORP

SAFEGUARD SCIENTIFICS INC

SONE

SFE

2061

4384

38.03

41.69

0.1538

0.1303

27.7

24.8

S D L INC

TEXAS INSTRUMENTS INC

SDLI

TXN

19130

131684

249.91

83.75

0.1206

0.0717

804.0

337.0

SEMTECH CORP

TIMES MIRROR CO NEW

SMTC

TMC

2195

3898

67.31

93.41

0.1064

0.0916

17.1

16.8

SYBASE INC

U S AIRWAYS GROUP INC

SYBS

U

1823

2981

20.34

41.72

0.0999

0.1017

19.7

19.5

SYMANTEC CORP

KANSAS CITY SOUTHN INDS INC

SYMC

KSU

4254

8362

71.63

75.63

0.0909

0.0754

30.0

30.3

Middle, close matches

ADEPT TECHNOLOGY INC

VERITAS D G C INC

ADTK

VTS

273

537

27.84

24.94

0.1155

0.1217

3.2

3.1

ALEXION PHARMACEUTICALS INC

ATWOOD OCEANICS INC

ALXN

ATW

704

702

46.84

51.25

0.1226

0.0958

3.7

4.1

CAMBRIDGE TECHNOLOGY PRTNRS

NEWPARK RESOURCES INC

CATP

NR

480

617

7.69

8.84

0.1173

0.1037

1.4

1.2

DREYERS GRAND ICE CREAM INC

HOUSTON EXPLORATION CO

DRYR

THX

640

573

22.78

23.69

0.0726

0.0671

0.6

0.9

EMCOR GROUP INC

SMITH A O CORP

EMCG

AOS

218

308

20.94

21.16

0.0516

0.0561

0.4

0.4

FIRST FINANCIAL BANCORP

SOUTHERN UNION CO NEW

FFBC

SUG

860

800

18.47

16.50

0.0461

0.0480

0.2

0.2

FIRST SENTINEL BANCORP INC

ROLLINS TRUCK LEASING CORP

FSLA

RLC

298

532

8.30

9.31

0.0440

0.0467

0.4

0.5

GOLD BANC CORP INC

SYSTEMAX INC

GLDB

SYX

242

213

6.41

5.94

0.0732

0.0911

0.1

0.1

GUILFORD PHARMACEUTICALS INC

NUEVO ENERGY CO

GLFD

NEV

357

379

15.25

20.41

0.0969

0.1080

4.1

4.2

LITTELFUSE INC

BRIGGS & STRATTON CORP

LFUS

BGG

836

953

42.72

41.06

0.0567

0.0542

8.8

9.0

MADISON GAS & ELECTRIC CO

TRIARC COMPANIES INC

MDSN

TRY

331

421

20.28

21.41

0.0410

0.0469

0.3

0.3

MICHAEL FOODS INC

A B M INDUSTRIES INC

MIKL

ABM

466

550

23.59

24.59

0.0467

0.0470

0.4

0.4

MICROS SYSTEMS INC

ALASKA AIRGROUP INC

MCRS

ALK

503

832

29.16

31.47

0.0731

0.0687

6.8

7.6
F5

Nasdaq Stock

NYSE Stock

Ticker

Symbols

Market

Cap. (Mils)

Share

Price

Return

Volatility

Adj. Dollar

Vol. (Mils)

Middle, close matches (continued)

MODINE MANUFACTURING CO

FERRO CORP

MODI

FOE

645

789

22.00

22.38

0.0452

0.0494

1.4

1.5

O CHARLEYS INC

D V I INC

CHUX

DVI

244

234

15.66

16.41

0.0694

0.0743

0.4

0.4

OHIO CASUALTY CORP

LA Z BOY INC

OCAS

LZB

670

788

11.16

15.09

0.0469

0.0481

1.7

1.8

P F F BANCORP INC

BRUSH WELLMAN INC

PFFB

BW

213

283

15.97

17.28

0.0536

0.0543

0.2

0.3

PHARMACYCLICS INC

ADMINISTAFF INC

PCYC

ASF

967

820

60.59

61.06

0.1305

0.1165

6.1

8.1

PRIMA ENERGY CORP

NACCO INDUSTRIES INC

PENG

NC

364

242

42.94

37.16

0.0587

0.0623

3.9

3.8

RIGGS NATIONAL CORP WASH D C

LILLY INDUSTRIES INC

RIGS

LI

395

338

13.94

14.75

0.0508

0.0606

0.7

0.6

SELECTIVE INSURANCE GROUP

CARPENTER TECHNOLOGY CORP

SIGI

CRS

501

464

19.22

21.09

0.0445

0.0460

0.8

0.8

STERLING BANCSHARES INC

MEDICAL ASSURANCE INC

SBIB

MAI

287

257

11.00

11.44

0.0515

0.0567

0.2

0.2

TRIAD GUARANTY INC

LANDAMERICA FINANCIAL GROUP

TGIC

LFG

273

324

20.47

23.03

0.0767

0.0725

0.4

0.4

VETERINARY CENTERS OF AMERIC

WEBB DELAWARE CORP

VCAI

WBB

299

278

13.66

15.22

0.0603

0.0572

0.7

0.9

WILSONS LEATHER EXPERTS

VAIL RESORTS INC

WLSN

MTN

281

476

16.84

17.47

0.0630

0.0639

0.4

0.4

YOUNG BROADCASTING INC

MIDWEST EXPRESS HOLDINGS IN

YBTVA

MEH

268

313

23.84

22.06

0.0777

0.0617

0.8

0.9

Middle, other matches

A C T MANUFACTURING INC

SOUTHWEST SECURITIES GROUP

ACTM

SWS

580

386

34.72

33.00

0.1173

0.1328

9.7

8.0

AMERICAN SUPERCONDUCTOR CORP

KEITHLEY INSTRUMENTS INC

AMSC

KEI

722

447

46.03

49.88

0.1334

0.1068

18.6

18.6

AVT CORPORATION

N S GROUP INC

AVTC

NSS

246

397

7.78

18.41

0.1111

0.1001

3.5

3.7

BEN & JERRYS HOMEMADE INC

PARK ELECTROCHEMICAL CORP

BJICA

PKE

268

280

43.66

26.81

0.0877

0.0768

0.2

0.5

BRIGHTPOINT INC

FOUNDATION HEALTH SYSTEMS I

CELL

FHS

658

1379

11.84

11.59

0.1191

0.1020

3.5

3.7
F6

Nasdaq Stock

NYSE Stock

Ticker

Symbols

Market

Cap. (Mils)

Share

Price

Return

Volatility

Adj. Dollar

Vol. (Mils)

Middle, other matches (continued)

C T C COMMUNICATIONS GROUP I

COOPER COMPANIES INC

CPTL

COO

515

528

35.72

37.59

0.1428

0.0819

4.0

3.5

CARDIODYNAMICS INTL CORP

GENERAL CABLE CORP DEL NEW

CDIC

BGC

291

290

6.91

8.44

0.1566

0.1036

1.0

1.2

CENTURY SOUTH BANKS INC

DELTIC TIMBER CORP

CSBI

DEL

269

267

19.59

21.44

0.0493

0.0461

0.1

0.1

COCA COLA BOTTLING CO CONS

C T G RESOURCES INC

COKE

CTG

305

333

47.69

38.41

0.0300

0.0334

0.1

0.5

CONCURRENT COMPUTER CORP NEW

MODIS PROFESSIONAL SERVICES

CCUR

MPS

638

952

11.84

9.94

0.1352

0.1035

4.9

5.0

CONDUCTUS INC

CABLETRON SYSTEMS INC

CDTS

CS

274

4062

23.84

22.47

0.2272

0.1173

24.7

23.1

CYTOGEN CORP

RITE AID CORP

CYTO

RAD

567

1987

7.80

7.72

0.2068

0.1007

13.4

16.5

DATA BROADCASTING CORP

CHESAPEAKE ENERGY CORP

DBCC

CHK

553

513

6.06

5.34

0.1645

0.1389

1.1

2.9

GENE LOGIC INC

WEATHERFORD INTL INC NEW

GLGC

WFT

927

4364

36.41

40.28

0.1914

0.1038

53.1

55.2

GREAT PLAINS SOFTWARE INC

BOSTON SCIENTIFIC CORP

GPSI

BSX

408

9784

23.47

23.59

0.0916

0.0813

25.4

26.9

HALL KINION & ASSOCIATES INC

SWIFT ENERGY CO

HAKI

SFY

358

585

27.72

26.91

0.1170

0.0840

5.1

5.3

HARBINGER CORP

POLAROID CORP

HRBC

PRD

773

773

19.28

18.84

0.1452

0.0754

5.7

5.8

IMMUNOMEDICS INC

LANDS END INC

IMMU

LE

935

880

18.97

29.16

0.1626

0.0985

7.7

7.2

IMPATH INC

SHAW GROUP INC

IMPH

SGR

369

717

48.22

47.38

0.0938

0.0912

3.6

4.5

INDUSTRI MATEMATIK INTL CORP

GENERAL DATACOMM INDS INC

IMIC

GDC

203

111

6.41

5.53

0.1641

0.1453

0.2

0.1

INFORMATION ARCHITECTS CORP

CAREMARK RX INC

IARC

CMX

254

1264

8.72

6.22

0.2116

0.1303

6.1

5.1

INTERNATIONAL FIBERCOM INC

FURNITURE BRANDS INTL INC

IFCI

FBN

566

758

18.56

15.38

0.1460

0.0912

7.7

6.7

IRVINE SENSORS CORP

WESTERN DIGITAL CORP

IRSN

WDC

234

485

5.55

4.28

0.1725

0.1287

2.9

3.6

IRWIN FINANCIAL CORP

DETROIT DIESEL CORP

IRWN

DDC

319

387

15.22

15.59

0.0616

0.0554

0.1

0.2
F7

Nasdaq Stock

NYSE Stock

Ticker

Symbols

Market

Cap. (Mils)

Share

Price

Return

Volatility

Adj. Dollar

Vol. (Mils)

Middle, other matches (continued)

M G I PHARMA INC

M S C INDUSTRIAL DIRECT INC

MOGN

MSM

383

726

24.84

21.34

0.1360

0.1161

1.6

2.0

MAPINFO CORP

BENCHMARK ELECTRONICS INC

MAPS

BHE

350

618

38.34

37.97

0.0785

0.1052

2.5

2.2

MAVERICK TUBE CORP

AVISTA CORP

MAVK

AVA

549

878

30.72

23.56

0.1069

0.1106

3.2

3.4

MEMBERWORKS INC

DRIL QUIP INC

MBRS

DRQ

475

722

29.28

41.91

0.1387

0.1054

1.6

1.6

N C O GROUP INC

GEORGIA GULF CORP

NCOG

GGC

642

720

25.06

23.09

0.0940

0.0828

2.4

3.9

NANOMETRICS INC

H S RESOURCES INC

NANO

HSE

342

581

30.31

30.78

0.1089

0.0772

2.2

2.2

O S I PHARMACEUTICALS INC

I T T EDUCATIONAL SERVICES

OSIP

ESI

420

471

15.91

19.06

0.1461

0.0888

1.5

1.4

OBJECTIVE SYSTEMS INTEGRATOR

GENESCO INC

OSII

GCO

351

349

9.55

16.03

0.1624

0.0879

2.3

2.1

PHARMOS CORP

TOTAL RENAL CARE HLDGS INC

PARS

TRL

208

320

3.97

3.91

0.1396

0.1190

1.0

0.6

PROFIT RECOVERY GROUP INTL I

ANNTAYLOR STORES CORP

PRGX

ANN

779

965

15.72

31.41

0.0991

0.0942

23.5

15.8

PROJECT SOFTWARE & DEV INC

AVIS RENT A CAR

PSDI

AVI

532

589

24.41

18.88

0.1361

0.0880

1.6

1.5

S B S TECHNOLOGIES INC

ROGERS CANTEL MOBILE COMMS

SBSE

RCN

242

539

36.97

30.25

0.1155

0.0852

1.2

1.3

SCHOLASTIC CORP

ROPER INDUSTRIES INC NEW

SCHL

ROP

895

1063

55.38

34.88

0.0562

0.0651

1.4

1.5

SCICLONE PHARMACEUTICALS INC

SENSORMATIC ELECTRONICS COR

SCLN

SRM

350

1334

11.13

17.41

0.1662

0.0951

4.0

3.7

SPORTSLINE COM INC

GENERAL SEMICONDUCTOR INC

SPLN

SEM

446

645

16.91

17.41

0.1779

0.0827

2.6

2.9

STARBASE CORP

PARKER DRILLING CO

SBAS

PKD

249

441

5.91

5.59

0.2426

0.0954

2.2

2.6

SYSTEMS & COMPUTER TECHNOLOG

ARGOSY GAMING CO

SCTC

AGY

627

490

19.28

17.28

0.1207

0.0890

1.8

1.8

TRANSKARYOTIC THERAPIES INC

TIMBERLAND CO

TKTX

TBL

969

1278

42.72

78.53

0.1348

0.0858

9.6

9.8

TRICORD SYSTEMS INC

STARTEK INC

TRCD

SRT

337

884

13.88

63.28

0.3081

0.1261

2.6

2.1
F8

Nasdaq Stock

NYSE Stock

Ticker

Symbols

Market

Cap. (Mils)

Share

Price

Return

Volatility

Adj. Dollar

Vol. (Mils)

Middle, other matches (continued)

ZIXIT CORP

PRIDE INTERNATIONAL INC

ZIXI

PDE

588

1485

35.53

24.16

0.1661

0.1084

10.4

9.1

ZOLL MEDICAL CORP

COLE KENNETH PRODUCTIONS IN

ZOLL

KCP

403

379

46.59

34.44

0.1091

0.0730

3.9

5.5

ZYGO CORP

TALBOTS INC

ZIGO

TLB

782

1723

54.34

54.72

0.1610

0.0847

9.2

10.9

Small, close matches

AMTRAN INC

STEWART INFORMATION SVCS CO

AMTR

STC

177

205

14.66

15.13

0.0711

0.0759

0.1

0.1

APPLIED INNOVATION INC

AVIATION SALES CO

AINN

AVS

128

115

8.25

7.66

0.1255

0.1173

0.4

0.5

ARCTIC CAT INC

MARCUS CORP

ACAT

MCS

190

197

10.91

11.19

0.0440

0.0538

0.3

0.2

BLUE WAVE SYSTEMS INC

PEDIATRIX MEDICAL GROUP

BWSI

PDX

195

167

12.44

10.66

0.1485

0.1333

2.7

2.4

CADMUS COMMUNICATIONS CORP

AMCAST INDUSTRIAL CORP

CDMS

AIZ

80

82

8.97

9.16

0.0628

0.0600

0.1

0.1

COINSTAR INC

UNITED AUTO GROUP INC

CSTR

UAG

185

197

9.17

9.13

0.1128

0.1107

0.2

0.4

FIRST WASHINGTON BANCRP INC

ESTERLINE TECHNOLOGIES CORP

FWWB

ESL

163

257

14.66

14.78

0.0486

0.0639

0.3

0.3

INTERMET CORP

COMFORT SYSTEMS USA INC

INMT

FIX

156

207

6.16

5.44

0.0698

0.0777

0.2

0.2

L S I INDUSTRIES INC

QUANEX CORP

LYTS

NX

159

215

15.53

15.09

0.0543

0.0593

0.6

0.6

METRO INFORMATION SERVICES I

M S C SOFTWARE CORP

MISI

MNS

135

139

8.97

10.03

0.0968

0.0806

0.4

0.4

SAVOIR TECHNOLOGY GROUP INC

CONSOLIDATED GRAPHICS INC

SVTG

CGX

114

163

8.39

10.34

0.0791

0.0902

0.3

0.3

SPACELABS MEDICAL INC

LYDALL INC

SLMD

LDL

113

156

11.91

9.91

0.0544

0.0641

0.3

0.3

SS & C TECHNOLOGIES INC

CHART INDUSTRIES INC

SSNC

CTI

72

99

4.45

4.19

0.1074

0.0958

0.1

0.1

Small, other matches

3 D SYSTEMS CORP DEL

PIONEER NATURAL RESOURCES C

TDSC

PXD

176

1368

14.81

13.59

0.0910

0.0854

3.0

3.1

3D0 CO THE

ABERCROMBIE & FITCH CO

THDO

ANF

189

926

5.30

9.09

0.1173

0.0922

6.4

8.1
F9

Nasdaq Stock

NYSE Stock

Ticker

Symbols

Market

Cap. (Mils)

Share

Price

Return

Volatility

Adj. Dollar

Vol. (Mils)

Small, other matches (continued)

4FRONT TECHNOLOGIES INC

FEDERAL MOGUL CORP

FFTI

FMO

127

735

10.59

9.97

0.1211

0.0887

5.1

6.0

A C T NETWORKS INC

APRIA HEALTHCARE GROUP INC

ANET

AHG

155

621

14.75

11.94

0.1237

0.1163

5.5

5.8

ADVANCED AERODYNAMICS STRUC

SIMULA INC

AASI

SMU

24

24

3.42

2.31

0.1280

0.1266

0.0

0.0

AFTERMARKET TECHNOLOGY CORP

SOLA INTERNATIONAL INC

ATAC

SOL

115

122

5.59

4.94

0.1121

0.0926

0.5

0.4

ANDOVER BANCORP INC DEL

C P I CORP

ANDB

CPY

180

217

28.31

21.84

0.0411

0.0630

0.3

0.3

ANIKA THERAPEUTICS INC

MAGELLAN HEALTH SERVICES IN

ANIK

MGL

19

75

1.88

2.34

0.1032

0.1240

0.3

0.3

ARIEL CORP

LABORATORY CORP AMERICA HL

ADSP

LH

46

8379

3.50

65.06

0.7594

0.8687

0.4

8.3

ASHTON TECHNOLOGY GROUP INC

RANGE RESOURCES CORP

ASTN

RRC

100

107

3.61

2.84

0.1890

0.1331

0.4

0.5

B E I TECHNOLOGIES INC

CRYOLIFE INC

BEIQ

CRY

136

250

18.22

20.28

0.1085

0.0780

0.2

0.3

BIO LOGIC SYS CORP

PILLOWTEX CORP

BLSC

PTX

24

61

5.97

4.19

0.1319

0.1037

0.1

0.1

BITSTREAM INC

ENTRADE INC

BITS

ETA

57

76

7.38

8.56

0.1845

0.1663

0.6

0.7

CASINO DATA SYSTEMS

B M C INDUSTRIES INC MN

CSDS

BMC

80

113

4.34

4.09

0.1318

0.1177

0.2

0.3

COINMACH LAUNDRY CORP

REEBOK INTERNATIONAL LTD

WDRY

RBK

178

785

13.72

13.91

0.1129

0.0864

2.4

2.5

COLLAGENEX PHARMACEUTICALS I

C B RICHARD ELLIS SERVICES

CGPI

CBG

90

197

10.41

9.47

0.1326

0.1015

0.2

0.2

COMMUNICATIONS SYSTEM INC

U R S CORP NEW

CSII

URS

151

234

17.16

14.88

0.0723

0.0662

0.3

0.3

COMPU DAWN INC

CIBER INC

MYTN

CBR

159

1009

15.94

17.03

0.2234

0.0951

3.0

2.5

COMTECH TELECOMMUNICATIONS C

SAGA SYSTEMS INC

CMTL

AGS

101

425

14.00

14.81

0.1426

0.1262

1.0

1.0

CRAFTMADE INTERNATIONAL INC

ACCEPTANCE INSURANCE COS IN

CRFT

AIF

38

71

6.19

5.03

0.0850

0.0815

0.1

0.1

CREATIVE HOST SERVICES INC

NATIONAL DISCOUNT BRKRS GRP

CHST

NDB

157

471

27.38

27.84

0.2405

0.2638

3.7

3.2
F10

Nasdaq Stock

NYSE Stock

Ticker

Symbols

Market

Cap. (Mils)

Share

Price

Return

Volatility

Adj. Dollar

Vol. (Mils)

Small, other matches (continued)

DATA RACE INC

HEALTHSOUTH CORP

RACE

HRC

169

2865

7.36

7.38

0.2688

0.0936

9.3

11.1

DATA SYSTEMS & SOFTWARE INC

MERIDIAN RESOURCE CORP

DSSI

TMR

41

235

5.47

5.06

0.1181

0.1011

0.3

0.3

DIANON SYSTEMS INC

REX STORES CORP

DIAN

RSC

169

194

23.69

21.06

0.0727

0.0947

1.8

2.5

EAGLE BANCSHARES INC

LINDSAY MANUFACTURING CO

EBSI

LNN

71

226

12.84

18.13

0.0553

0.0639

0.0

0.0

ECLIPSE SURGICAL TECHNOLOGIE

E E X CORP

ESTI

EEX

134

216

4.47

5.03

0.1455

0.1115

0.4

0.4

EPICOR SOFTWARE CORP

C K E RESTAURANTS INC

EPIC

CKR

146

158

3.53

3.09

0.1302

0.1060

0.6

0.5

EPIMMUNE INC

BRILLIANCE CHINA AUTOMOTIVE

EPMN

CBA

50

922

6.81

17.75

0.3137

0.3536

0.2

0.6

EQUINOX SYSTEMS INC

BOYD GAMING CORP

EQNX

BYD

30

342

5.59

5.47

0.1028

0.0885

0.2

0.2

EURONET SERVICES INC

REVLON INC

EEFT

REV

124

139

7.53

6.94

0.1460

0.1229

0.0

0.2

F P I C INSURANCE GROUP INC

DOLLAR THRIFTY AUTOMOTIVE G

FPIC

DTG

148

436

15.66

17.94

0.0933

0.0884

1.1

1.1

GENERAL BINDING CORP

ALPINE GROUP INC

GBND

AGI

105

98

7.86

6.66

0.0944

0.0674

0.1

0.1

GENUS INC

DOT HILL SYSTEMS CORP

GGNS

HIL

153

255

8.16

10.69

0.1869

0.1339

1.0

0.8

GENZYME CORP

HA LO INDUSTRIES INC

GZTR

HMK

159

247

5.56

5.03

0.1285

0.1121

1.0

0.8

GREEN MOUNTAIN COFFEE INC

FIRST REPUBLIC BANK S F

GMCR

FRC

68

176

20.13

18.78

0.0786

0.0549

0.2

0.2

GROUP 1 SOFTWARE INC NEW

GROUP 1 AUTOMOTIVE INC

GSOF

GPI

88

255

16.31

11.91

0.1212

0.0885

0.1

0.1

HAGGAR CORP

DISCOUNT AUTO PARTS INC

HGGR

DAP

74

157

11.22

9.41

0.0407

0.0718

0.1

0.1

INFONAUTICS INC

TRUMP HOTELS & CASINO RESRT

INFO

DJT

49

66

4.03

2.97

0.2225

0.1163

0.3

0.2

INFORMATION RESOURCE ENGNRIN

GUESS INC

IREG

GES

121

783

18.22

18.13

0.1590

0.1197

1.4

1.6

INTERSTATE NATL DEALER SVCS

ELSCINT LIMITED

ISTN

ELT

25

103

5.36

6.38

0.0765

0.0687

0.0

0.0
F11

Nasdaq Stock

NYSE Stock

Ticker

Symbols

Market

Cap. (Mils)

Share

Price

Return

Volatility

Adj. Dollar

Vol. (Mils)

Small, other matches (continued)

LASER PACIFIC MEDIA CORP

BROWN & SHARPE MFG CO

LPAC

BNS

36

41

4.61

3.22

0.2595

0.0961

0.2

0.1

LESCO INC OHIO

GUEST SUPPLY INC

LSCO

GSY

131

122

15.44

19.00

0.0614

0.0602

0.1

0.4

LOGILITY INC

CHYRON CORP

LGTY

CHY

57

91

4.28

2.72

0.1815

0.2023

0.1

0.2

M H MEYERSON & CO INC

LODGIAN INC

MHMY

LOD

29

84

4.48

2.97

0.4148

0.1183

0.2

0.2

M S CARRIERS INC

OCEANEERING INTERNATIONAL I

MSCA

OII

199

455

17.03

19.31

0.0745

0.0836

1.0

1.1

MATHSOFT INC

CAPITAL SENIOR LIVING CORP

MATH

CSU

29

49

2.80

2.50

0.1499

0.0851

0.1

0.1

MINNTECH CORP

WORLD FUEL SERVICES CORP

MNTX

INT

54

102

7.91

8.41

0.0728

0.0732

0.2

0.2

NETSMART TECHNOLOGIES INC

SITEL CORP

NTST

SWW

20

390

5.56

5.69

0.2659

0.1338

0.1

0.6

ODETICS INC

JACKPOT ENTERPRISES INC

ODETA

J

105

116

12.97

13.44

0.1140

0.0772

0.2

0.4

ON TECHNOLOGY CORP

BENTON OIL & GAS CO

ONTC

BNO

55

84

3.84

2.84

0.1723

0.1392

0.3

0.6

ONYX PHARMACEUTICALS INC

UNITED RENTALS INC

ONXX

URI

180

1268

12.69

17.56

0.1639

0.0980

4.6

4.7

PHARMANETICS INC

BUCKLE INC

PHAR

BKE

119

260

15.81

12.22

0.1032

0.0994

0.2

0.1

POINT WEST CAPTIAL CORP

AMERICAN SKIING CO

PWCC

SKI

12

30

3.64

1.94

0.2124

0.1103

0.0

0.0

PRECISION OPTICS CORP INC

MID ATLANTIC MEDICAL SVCS I

POCI

MME

122

585

12.41

11.69

0.2516

0.1022

1.9

1.8

PROPHET 21 INC

BURNS INTERNATIONAL SVCS CO

PXXI

BOR

47

223

12.94

11.22

0.1074

0.0785

0.1

0.1

PURE WORLD INC

CARSON INC

PURW

CIC

24

41

2.88

4.16

0.1163

0.1184

0.0

0.0

R F MONOLITHICS INC

MATERIAL SCIENCES CORP

RFMI

MSC

68

166

11.22

10.69

0.1082

0.0764

0.1

0.1

R M H TELESERVICES INC

B W A Y CORP

RMHT

BY

66

68

7.84

7.16

0.1330

0.0894

0.0

0.0

RENTRAK CORP

ROUGE INDUSTRIES INC

RENT

ROU

41

54

3.94

3.66

0.1126

0.0852

0.1

0.1
F12

Nasdaq Stock

NYSE Stock

Ticker

Symbols

Market

Cap. (Mils)

Share

Price

Return

Volatility

Adj. Dollar

Vol. (Mils)

Small, other matches (continued)

RESOURCE BANCSHARES MORT GP

AVIALL INC NEW

RBMG

AVL

85

83

4.53

4.53

0.1019

0.0724

0.3

0.2

ROBINSON NUGENT INC

SUPERIOR TELECOM INC

RNIC

SUT

60

221

11.81

11.31

0.0887

0.0898

0.1

0.2

SHARPER IMAGE CORP

I S P A T INTERNATIONAL N V

SHRP

IST

152

235

12.66

8.59

0.3102

0.1136

0.3

0.4

SHELDAHL COMPANY

BIRMINGHAM STEEL CORP

SHEL

BIR

51

102

4.34

3.38

0.1163

0.1002

0.1

0.1

SHOE CARNIVAL INC IN

I M C O RECYCLING INC

SCVL

IMR

86

106

6.64

6.34

0.0882

0.0698

0.5

0.4

SIEBERT FINANCIAL CORP

CASH AMERICA INTERNATIONAL

SIEB

PWN

194

218

8.47

8.50

0.3170

0.0878

0.1

0.2

SPECTRANETICS CORP

NATIONAL STEEL CORP

SPNC

NS

125

215

5.38

5.16

0.1092

0.0784

0.2

0.2

SPIRE CORP

TITAN INTERNATIONAL INC ILL

SPIR

TWI

20

128

6.00

6.16

0.1533

0.0833

0.1

0.1

STARTEC GLOBAL COM CORP

UNIT CORP

STGC

UNT

154

405

11.38

11.84

0.1399

0.0881

1.8

1.8

STRATASYS INC

DONNA KARAN INTERNATIONAL

SSYS

DK

37

138

6.03

6.34

0.1028

0.0833

0.1

0.1

STYLECLICK COM INC

EXIDE CORP

IBUY

EX

76

196

9.78

9.28

0.1233

0.1094

0.4

0.5

SYMIX SYSTEMS INC

POLYMER GROUP INC

SYMX

PGI

77

314

10.22

9.78

0.1202

0.0932

0.1

0.3

TELULAR CORP

STORAGE TECHNOLOGY CORP

WRLS

STK

151

1223

12.09

12.25

0.5141

0.0915

2.5

2.5

TIER TECHNOLOGIES INC

COMPUTER TASK GROUP INC

TIER

TSK

62

137

5.59

6.53

0.1078

0.0846

0.4

0.3

TROPICAL SPORTSWEAR INTL COR

NORTEK INC

TSIC

NTK

166

258

21.81

23.34

0.1033

0.0646

0.5

0.6

U S ENERGY SYSTEMS INC

INPUT OUTPUT INC

USEY

IO

34

363

5.48

6.94

0.1053

0.0838

0.4

0.5

UROCOR INC

TYLER TECHNOLOGIES INC

UCOR

TYL

41

173

4.19

3.97

0.0910

0.1062

0.1

0.1

VANS INC

U C A R INTERNATIONAL INC

VANS

UCR

185

598

13.47

13.25

0.0877

0.0956

1.0

0.9

VARI L INC

M E M C ELECTRONIC MATERIAL

VARL

WFR

96

1236

13.53

17.72

0.1307

0.1221

1.1

1.0