We exploit a discontinuity in the New York Stock Exchange Designated Market Maker (DMM) contract to identify causal effects of DMM participation on equilibrium market outcomes. We document that contractual features that enhance DMM participation are associated with increased depth, narrower...

Much empirical research has been conducted concerning the effect of short-selling on market quality and volatility. However, the evidence is inconclusive and still a matter of debate. Using intraday data in a pure order-driven market we show that allowing for short-selling decreases the adverse...