Market Microstructure and Spread Pattern in the JASDAQ Market

Firms listed on JASDAQ can select either the order-driven (hereafter OD) system, where formal market makers are not involved, or the market-maker (hereafter MM) system for the trading of stocks. How differences in trading systems affect pricing and liquidity is a key issue in the study of market microstructure. This paper examines empirical analyses of spread patterns for stocks listed on JASDAQ in order to ascertain the implications of differences in trading systems on price formation.