Liquidity Provision Contracts and Market Quality: Evidence from the New York Stock Exchange
利用纽约证券交易所指定做市商合约中的断点，识别做市商参与对市场质量的因果效应，发现增强参与的特征提升了市场深度、缩小了买卖价差并提高了价格改善率，且效果主要来自其他市场的流动性提供。
Abstract 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 bid-ask spreads, and higher rates of price improvement, with most of the improvements attributable to increases in liquidity provision on markets other than the NYSE. These results cannot be attributed to the mechanical effects of the contractual changes and support the interpretation that market making is characterized by strategic complementarity. Received October 7, 2017; editorial decision December 10, 2018 by Editor Itay Goldstein.