TY - JOUR T1 - Crossed Markets JF - The Journal of Alternative Investments SP - 46 LP - 58 DO - 10.3905/jai.2006.655936 VL - 9 IS - 2 AU - Ryan Garvey AU - Anthony Murphy Y1 - 2006/09/30 UR - https://pm-research.com/content/9/2/46.abstract N2 - Nasdaq-listed stocks are traded in multiple trading venues. For example, during May 2005, only 42% of all trades occurred on Nasdaq; the remaining 58% of trades occurred in non-linked market centers. Quotes in these non-linked markets often lock or cross each other. This article examines how crossed markets create potential arbitrage opportunities in Nasdaq stocks. On average, actively traded Nasdaq listed stocks are crossed approximately 0.5% of the trading day. The incidence of crosses is higher in more fragmented markets. When crosses occur, the mean duration is three seconds, the value of the cross is around one cent, and the offer side has approximately 2,000 shares available for trading. A simulated trading analysis shows that institutional traders, who act promptly and pay little in transaction costs, can potentially exploit the arbitrage opportunities presented by market crosses.TOPICS: Security analysis and valuation, exchanges/markets/clearinghouses, quantitative methods, performance measurement ER -