Title: A critical review to analyse the effect of online and traditional trading on effective market performance on the Nasdaq

Authors: Haroun Alryalat, Yogesh Kumar Dwivedi, Jasna Kuljis, Ray J. Paul

Addresses: School of Information Systems Computing and Mathematics, Brunel University, Uxbridge UB8 3PH, UK. ' School of Information Systems Computing and Mathematics, Brunel University, Uxbridge UB8 3PH, UK. ' School of Information Systems Computing and Mathematics, Brunel University, Uxbridge UB8 3PH, UK. ' School of Information Systems Computing and Mathematics, Brunel University, Uxbridge UB8 3PH, UK

Abstract: The purpose of this paper is to present a critical analysis on the competition between online (ECN) and traditional (Market Maker (MM)) trading on the Nasdaq stock exchange. Online stock trading mechanisms at the exchanges are often a hybrid of dealer and auction markets. Different aspects of trading execution, which is the most commonly used market centre at present, are analysed. This leads to a discussion on: (1) the bath that executes order is organised and (2) its impact on the effective market performance, trading cost and investor behaviour.

Keywords: online trading; traditional trading; market performance; Nasdaq; critical review; stock exchange; trading cost; investor behaviour; electronic finance; e-finance; e-trading; electronic trading; trading execution.

DOI: 10.1504/IJEF.2006.010313

International Journal of Electronic Finance, 2006 Vol.1 No.2, pp.151 - 170

Published online: 14 Jul 2006 *

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