Order Consolidation and Market Quality : Evidence from the NASDAQ Systems Integration

We study the effect of the NASDAQ systems integration on transaction costs, market quality and order characteristics. It is found that the NASDAQ Single Book, on average, has reaped a greater market share and lead to a more remarkable increase in less actively trade stocks. The quoted bid-ask spreads in the NASDAQ Single Book have declined uniformly for all stocks but more substantially for less actively traded stocks. The market depth on both sides of the book has increased uniformly for all stocks considered in this study. The percentage of fleeting orders, cancelled orders, and hidden orders executions have decreased substantially, but time-to-execution is currently slightly larger, in contrast with a faster execution speed as anticipated by the NASDAQ