Effect of the actual size rule under market stress

David C. Porter, Yusif Simaan, Daniel G. Weaver, David K. Whitcomb

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


We examine the introduction of the Actual Size Rule (ASR) on Nasdaq during a control period and a period of market stress. We find that market makers in both ASR and Non-ASR stocks reduce quotation sizes and widen spreads when under stress but the reduction of quotation size and increase in spread width are significantly larger for ASR stocks. We also examine October 27, when the market was under the most severe stress. We find ASR and Non-ASR stocks have similar reductions in time-weighted quotation ask size when compared with the control sample but ASR bid sizes are about 10% smaller than Non-ASR bid sizes. Our findings imply that the ASR rule may significantly reduce market quality under times of market stress.

Original languageEnglish (US)
Pages (from-to)87-103
Number of pages17
JournalReview of Quantitative Finance and Accounting
Issue number2
StatePublished - Mar 2006

All Science Journal Classification (ASJC) codes

  • Accounting
  • Business, Management and Accounting(all)
  • Finance


  • Actual size rule
  • Market stress


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