"We find that - consistent with pre-decimal, pre-ECN studies - these stocks have shown significant reductions in price volatility and quoted spreads, improvements in the information efficiency of prices, and reductions in trading costs," said NYSE Senior Vice President and Chief Economist Paul Bennett. "The improvements seem to stem from consolidated order flow, which supports the notion that the centralized NYSE auction market provides the best market for companies, thereby ultimately benefiting investors."
The study found that price volatility was reduced by half, quotes narrowed by more than a third, and execution costs were cut in half. The study compared the price volatility of the stocks 60 days before and after the listing transfer. The study used the same 60-day time frame to compare the quoted spread.
The study was conducted on the stocks of 39 companies that voluntarily transferred from January 2002 to March 2003 after decimalization. The stocks had an average market capitalization of $1.5 billion, ranging from $8 billion to approximately $160 million. The study can be found at http://www.nyse.com/pdfs/marketqualitystudy03.pdf.
