Hendershott, T., & Moulton, P. C. (2010). Automation, speed, and stock market quality: The NYSE’s hybrid [Electronic version]. Retrieved [insert date], from Cornell University, School of Hospitality Administration site: http://scholarship.sha.cornell.edu/articles/3/
Automation, Speed, and Stock Market Quality: The NYSE’s HybridArticles and Chapters
AbstractAutomation and trading speed are increasingly important aspects of competition among financial markets. Yet we know little about how changing a market’s automation and speed affects the cost of immediacy and price discovery, two key dimensions of market quality. At the end of 2006 the New York Stock Exchange introduced its Hybrid market, increasing automation and reducing the execution time for market orders from 10 seconds to less than one second. We find that the change raises the cost of immediacy (bid-ask spreads) because of increased adverse selection and reduces the noise in prices, making prices more efficient.