Trade execution costs on NASDAQ and the NYSE: A post-reform comparison

Trade execution costs remain larger on NASDAQ compared to the NYSE in the w ake of new SEC-mandated order-handling rules and reductions in tick sizes, but the differential across markets is smaller than in earlier years. Cross -sectional regression analysis indicates that the differences in average tr ade execution costs are not explained by variation in observable economic f actors. Quotations on both markets continue to cluster disproportionately o n round fractions, and more so on NASDAQ than the NYSE, but quotation round ing appears not to be responsible for the greater NASDAQ execution costs. P referencing agreements are highlighted as a likely reason that NASDAQ trade execution costs remain larger.