In 2001, the Securities and Exchange Commission (SEC) required market centers to publish monthly execution-quality reports in an effort to spur competition for order flow between markets. Using samples of stocks trading on several markets, we investigate whether past execution quality affects order-routing decisions and whether the new disclosure requirements influence this relationship. We find that routing decisions are associated with execution quality; markets reporting low execution costs and fast fills subsequently receive more orders. Moreover, the reports themselves appear to provide information that was unavailable previously. Our results are consistent with active competition for order flow that can be influenced by public disclosure. (JEL G24, G28, K22)
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Boehmer et al. (2006) studied this question.