LIMIT ORDERS AND THE ALLEGED NASDAQ COLLUSION

Different methods are used by the NYSE/Amex and the Nasdaq to accommod ate limit orders received from investors. This accounts for at least p art of the excess of Nasdaq spreads over NYSE spreads, adjusted for tr ading volume, and is a factor in determining this excess that is indep endent of collusion on the Nasdaq. The spread-comparison evidence give n by others to support their belief that there is collusion among mark et makers on the Nasdaq therefore overstates the probability of collus ion and its significance if it exists.