Reducing Costs of Stock Transactions: A Study of Alternative Trade Completion Systems

Vol. I: Summary of Results

by Robert Petruschell, John Y. Lu, L. E. Knollmeyer, Dave J. Dreyfuss

Download

Download Free Electronic Document

FormatFile SizeNotes
PDF file 0.8 MB

Use Adobe Acrobat Reader version 10 or higher for the best experience.

Purchase

Purchase Print Copy

 FormatList Price Price
Add to Cart Paperback21 pages $20.00 $16.00 20% Web Discount

Many of the operational problems of the New York Stock Exchange originate in the trade completion part of stock trading activities. RAND has developed methods for analyzing these problems, including a simulation model to test performance implications of policy and procedural alternatives without costly actual experimentation. It is estimated that at a trading volume like that of 1968, several recommended changes would produce an annual savings of $120 million for the industry as a whole: use of partial deliveries, delivery priorities, reduction of transfer time, and reduction of other causes of delay in completing transactions — specifically, DKs (bank refuses to accept delivery), uncompared trade (no broker-to-broker delivery), and wrong denomination (stock transfer required). These savings are net of the outlays required to accomplish the essential changes in the operating system. At higher levels of trading, when the NYSE handles 20 million shares per day and the activity in the other markets increases correspondingly, savings would be approximately $177 million.

This report is part of the RAND Corporation report series. The report was a product of the RAND Corporation from 1948 to 1993 that represented the principal publication documenting and transmitting RAND's major research findings and final research.

Permission is given to duplicate this electronic document for personal use only, as long as it is unaltered and complete. Copies may not be duplicated for commercial purposes. Unauthorized posting of RAND PDFs to a non-RAND Web site is prohibited. RAND PDFs are protected under copyright law. For information on reprint and linking permissions, please visit the RAND Permissions page.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.