Financial Regulation, Clientele Segmentation, and Stock Exchange Order Types / Sida Li, Mao Ye, Miles Zheng.

Format:

Book

Author/Creator:

Li, Sida.

Contributor:

National Bureau of Economic Research.

Ye, Mao.

Zheng, Miles.

Series:

Working Paper Series (National Bureau of Economic Research) no. w28515.

NBER working paper series no. w28515

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2021.

Summary:

Financial regulations and clientele segmentation explain the proliferation of order types on stock exchanges. Plain market and limit orders lose money, indicating that informed traders use complex orders. Fifty-seven percent of trading volume comes from non-routable orders, which are designed to bypass Reg NMS. Because Reg NMS routes orders based on the best gross prices, it often routes orders to worse net prices after adjusting for fees. Non-routable orders win speed races to capture short-term profits, but all order types containing long-term information are routable. An order type that complies with share repurchase regulations earns a 30-day return of 7%.

Notes:

Print version record

February 2021.