The Highest Price Ever: The Great NYSE Seat Sale of 1928-1929 and Capacity Constraints

摘要

During the 1920s the New York Stock Exchange's position as the dominant American exchange was eroding. Costs to customers, measured as bid-ask spreads, spiked when surging inflows of orders collided with the constraint created by a fixed number of brokers. The NYSE's management proposed and the membership approved a 25 percent increase in the number of seats by issuing a quarter-seat dividend to all members. An event study reveals that the aggregate value of the NYSE rose in anticipation of improvedcompetitiveness. These expectations were justified as bid-ask spreads became less sensitive to peak volume days.