Refusing the best price?

Sida Li, Mao Ye, Miles Zheng

Research output: Contribution to journalArticlepeer-review


The Regulation National Market System (Reg NMS) links fragmented stock exchanges by routing orders to the National Best Bid and Offer (NBBO). As the NBBO ignores exchange fees, 62% of routings lead to worse net prices. An increase in fee differences increases the market share captured by orders that refuse Reg NMS routings, particularly for stocks whose fees account for a large portion of transaction costs. Heterogeneous opportunity costs rationalize routing choices: non-routable orders entail lower non-execution costs than routable orders. Our results indicate that fees and clientele segmentation drive the proliferation of order types in the Reg NMS era.

Original languageEnglish (US)
Pages (from-to)317-337
Number of pages21
JournalJournal of Financial Economics
Issue number2
StatePublished - Feb 2023
Externally publishedYes


  • High-frequency trading
  • Make/take fees
  • Order types
  • Regulation NMS
  • Routing

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management


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