The Structure of the Nasdaq Stock Market

The Nasdaq Stock Market has recently come under intense scrutiny because of charges that some of its dealers have colluded to inflate the bid-ask spreads of Nasdaq-listed stocks. These charges of collusion were largely precipitated by a study by Professors William Christie and Paul Schultz, which was first reported in the press on May 26, 1994 and ultimately published in the December 1994 Journal of Finance. Subsequent to this study, both the Department of Justice and the Securities and Exchange Commission began broad investigations of Nasdaq.

Christie and Schultz find that many Nasdaq stocks exhibit a paucity of odd-eighths quotes (quotes that end in one, three, five, or seven eighths) and conclude that "individual market makers implicitly agree… Read the entire Statement.