International trade-venue clienteles and order-flow competitiveness

This paper tests a generalized version of the investor clientele hypothesis of Amihud and Mendelson [J. Finan. Econ. 17 (1986) 223]. This international trade-venue clientele effect hypothesis is supported for the Canadian cross-listed firms undifferentiated and differentiated by US trade venue, except for TSE shares cross-listed on NASDAQ. The hypothesized relationship between relative holding periods (measured using shares outstanding and share float) and effective half-spreads changes after TSE decimalization, and differs if the cross-listed shares have options traded on them. The empirical findings suggest that the TSE lost (won) executed order flow relative to the AMEX and to NYSE for shares with (without) options traded on them.