Competition to Provide Liquidity on the New York Stock Exchange Harvard Case Solution & Analysis

In order to be successful in attracting trading volume and earn revenue from trade taxes, exchanges should allow potential traders to trade quickly at a certain price. This is known as the provision of liquidity. On the New York Stock Exchange, the liquidity comes from two sources: traders doing business on the floor of the exchange, and those who send orders electronically from off the exchange floor seats. The floor traders are traditionally said to have advantages over the floor traders. If so, it might scare off the floor traders from providing liquidity and reducing the effectiveness of the security market. We believe that the traders on the floor seems like some of the benefits in providing liquidity, although the differences are not large. This suggests that the New York Stock Exchange is justified in several of its recent initiatives aimed at leveling the playing field between on and off floor traders. "Hide
by Robert Battalio, Robert Jennings Source: Business Horizons 10 pages. Publication Date: November 1, 2007. Prod. #: BH256-PDF-ENG

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