A 1994 study concluded dealers were colluding to maintain wide bid/ask spreads by concentrating market quotes in quarters instead of eighths.This study eventually led to new order handling rules that required quotes to be available to the public through:
A) NASDAQ market
B) Electronic communications networks (ECN)
C) High frequency trading (HFT)
D) Algorithmic trading (AT)
E) Intermarket trading system (ITS)

Question

Quizplus · Accepted Answer

The new order handling rules that required quotes to be available to the public through electronic communications networks (ECN) were implemented as a result of the 1994 study. This allowed for greater transparency and competition in the market, and reduced the ability of dealers to collude and maintain wide bid/ask spreads. NASDAQ is a stock exchange, high frequency trading (HFT) and algorithmic trading (AT) are trading strategies, while the Intermarket Trading System (ITS) was a network used for trading stocks across different exchanges in the past.

A 1994 Study Concluded Dealers Were Colluding to Maintain Wide