Competition , Market Structure , and Bid-Ask Spreads in Stock Option Markets

@inproceedings{Mayhew2007CompetitionM,
  title={Competition , Market Structure , and Bid-Ask Spreads in Stock Option Markets},
  author={Stewart Mayhew},
  year={2007}
}
This paper examines the effects of competition and market structure on equity option bid-ask spreads from 1986 to 1997. Options listed on multiple exchanges have narrower spreads than those listed on a single exchange, but the difference diminishes as option volume increases. Option spreads become wider when a competing exchange delists the option. Options traded under a "Designated Primary Marketmaker" (DPM) have narrower quoted spreads than those traded in a traditional open outcry crowd… CONTINUE READING
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