TY - JOUR AU - Brown,William O., Jr. AU - Mulherin,J. Harold AU - Weidenmier,Marc D. TI - Competing With the NYSE JF - National Bureau of Economic Research Working Paper Series VL - No. 12343 PY - 2006 Y2 - June 2006 UR - http://www.nber.org/papers/w12343 L1 - http://www.nber.org/papers/w12343.pdf N1 - Author contact info: William Brown Department of Economics Claremont McKenna College Claremont, CA 91711 E-Mail: william.brown@claremontmckenna.edu J. Harold Mulherin Claremont McKenna College Department of Economics 500 E. Ninth Street Claremont, CA 91711 Tel: 909-607-3141 Fax: 909-621-8249 E-Mail: harold.mulherin@claremontmckenna.edu Marc D. Weidenmier Robert Day School of Economics and Finance Claremont McKenna College 500 East Ninth Street Claremont, CA 91711 Tel: 909/607-8497 Fax: 909/621-8249 E-Mail: marc_weidenmier@claremontmckenna.edu M2 - featured in NBER digest on 2006-06-26 AB - We study the stock exchange rivalry between the New York Stock Exchange (NYSE) and the Consolidated Stock Exchange (Consolidated) from 1885 to 1926 using a new database of bid-ask spreads and stock data collected from The New York Times and other primary sources. The magnitude of this important, but largely forgotten rivalry was substantial. From 1885 to 1895, the ratio of Consolidated to NYSE volume averaged 40 percent and reached as high as 60 percent. The market share of the Consolidated averaged 23 percent for approximately 40 years. The Consolidated focused on the relatively liquid securities on the NYSE as measured by bid-ask spreads and trading volume. Our results suggest that NYSE bid-ask spreads fell by more than 10 percent when the Consolidated began to trade NYSE stocks while bid-ask spreads for our quasicontrol group of stocks trading on the Boston Stock Exchange remain unchanged. The effect persisted over the entire history of the stock market rivalry until a series of scandals and investigations of the Consolidated by state regulators led to the demise of the exchange in the 1920s. The analysis suggests three conclusions: (1) the NYSE has faced significant long-run competition (2) the NYSE may be susceptible to a similar level of competition in the future and (3) that the Consolidated may have improved the efficiency of stock prices by contributing to the price discovery process. ER -