SEC Follow Up Exhibits Part C SEC_OEA_FCIC_001760-2501

Reg SHO Pilot Report 2/12/2007
Table 6: Liquidity Measures
This table summarizes how liquidity changes when the tick and bid tests are removed. The four months prior to the
Pilot start date (May 2, 2005) are called the “Pre-period” and the six months following the start date are called the
“Pilot Period”. The table shows the average change in various liquidity measures for Pilot and Control stocks and
estimates whether the Pilot stocks changed more than the Control stocks. Paired t-tests determine whether the
changes are significant. Tests of the difference between the changes are two-sample t-tests. **, * indicates statistical
significance at the 1 and 5% level in a two-tailed test. We test whether the Difference in the Change for Listed
Stocks is statistically different from that of Nasdaq NM Stocks using a regression framework. During the Pilot
Period, we run daily cross-sectional regressions of each variable on an indicator for Pilot Securities and the
variable’s pre-Pilot level (equation 1). We run the regression separately for Listed and Nasdaq NM Stocks and test
whether the coefficients on the Pilot indicator are similar. a, b indicates that the average coefficient for Nasdaq NM
Stocks is statistically different from the average coefficient for Listed Stocks at the 1% and 5% level in a two-tailed
test.
Panel A: Univariate Changes
Pilot Sample Control Sample Pilot Δ minus
Variable Market Pre-Pilot Pilot Δ Pre-Pilot Pilot Δ Control Δ
Ask Depth Listed 15.04 12.24 -2.80** 18.81 22.02 3.21** -6.00**
Ask Depth Nasdaq 21.23 26.63 5.40* 26.90 34.36 7.46** -2.05
Bid Depth Listed 12.16 12.89 0.73 15.96 18.71 2.76** -2.03
Bid Depth Nasdaq 21.41 28.44 7.04** 27.77 37.45 9.68** -2.65
Quoted Spread (¢) Listed 6.82 7.25 0.43 5.64 6.02 0.37 0.06
Quoted Spread (¢) Nasdaq 5.44 5.38 -0.06 5.59 5.93 0.34 -0.40
% Quoted Spread Listed 18.82 19.74 0.92 18.10 18.18 0.08 0.80
% Quoted Spread Nasdaq 26.61 27.90 1.29 28.40 29.62 1.22** 0.07
Effective Spread (¢) Listed 4.92 5.22 0.29 4.48 4.67 0.19 0.11
Effective Spread (¢) Nasdaq 5.22 4.92 -0.31** 5.29 5.27 -0.02 -0.29
% Effective Spread Listed 16.28 17.56 1.29 14.83 15.63 0.80 0.50
% Effective Spread Nasdaq 26.91 26.98 0.07 28.84 28.47 -0.37 0.40
Panel B: Average Regression Coefficients
Market Quality = α + β Pilot + β Pre Pilot Market Quality
i 1 i 2
Variable Market Pilot PrePilotControl R-squared
Ask Depth
Ask Depth
Listed
Nasdaq
-5.26**
-2.01**
1.18** 0.82
a
1.11** 0.79
Bid Depth
Bid Depth
Listed
Nasdaq
-1.42**
-2.47**
1.16** 0.82
b
1.13** 0.75
Quoted Spread (¢) Listed -0.36* 1.35** 0.74
Quoted Spread (¢) Nasdaq -0.31** 1.37** 0.75
% Quoted Spread Listed 0.86* 1.13** 0.62
% Quoted Spread Nasdaq 0.28** 1.11** 0.68
Effective Spread (¢) Listed -0.12 1.51** 0.80
Effective Spread (¢) Nasdaq -0.25** 1.31** 0.63
% Effective Spread Listed 0.26 1.24** 0.43
% Effective Spread Nasdaq 0.62** 1.12** 0.50
Prepared by the Office of Economic Analysis 65
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