THE IMPACT OF MULTIPLE LISTING ON THE BID-ASK SPREADS OF EQUITY OPTIONS

摘要

We empirically determined the predictors of bid-ask spreads of equity options within the context of the current multiple-listed options market. Four functional forms of an econometric model were developed with separate regressions of quoted and effective bid ask spreads on price, volume, volatility, multiple listing, and an interaction term of multiple listing and volume. Price emerged as the most powerful predictor of both quoted and effective spreads followed by multiple listing. Price and volatility increased spreads while multiple listing and volume reduced them. Multiple listing appeared to be more powerful than volume in explaining spreads. This is the first large-scale study of a mature (from a multiple listing perspective) options market. It establishes that spread reductions prevail several years after initial multiple listing. It provides evidence to support the importance of competition over economies of scale in explaining spreads.