Quote Competitiveness, 100-share Quotes, and Decimalization.

The finance literature documents a significant post-decimalization decline in intermarket quote competitiveness. We show that this result is due primarily to the decline in 100-share NBBO-matching quotes posted by NASDAQ. After decimalization, such quotes decline by more than 90%. At that time, the intermarket trading system (ITS) regards 100-share quotes as meaningless; these quotes are exempt from the trade-through rule and are generally ignored by ITS participants. We therefore argue that the major decline in quote competitiveness observed by previous research is largely nominal, and that decimalization had a much lesser impact on quote competitiveness than previously believed. [ABSTRACT FROM AUTHOR]