Optimal Listing Policy: Why Microsoft and Intel Do Not List on the NYSE Reena Aggarwaland James J. etown UniversityRoom G4 Old NorthWashington, . 20057(202) 687-3784 (Aggarwal)(202) 687-3765 (Angel)(202) 687-4031 (fax)******@.etown.******@. 28, ments e!1Optimal Listing Policy: Why Microsoft and Intel Do Not List on the NYSE AbstractMany Nasdaq-listed firms that could list on the NYSE have not listed, despite Nasdaq’s generallyhigher bid-ask spreads. These higher spreads give broker-dealers more incentive to market make buy mendations for Nasdaq-listed stocks more frequently than for NYSE-listedstocks. Firms face a tradeoff between the low transaction costs of an auction market and themarketing advantages of a dealer market. The largest firms prefer a dealer market in whichinstitutional investors can bypass the high spreads which motivate broker-dealers to market the stockto retail investors. The model also explains why firms may have positive price reactions when theyswitch from Nasdaq to AMEX and also when they move from AMEX to Nasdaq. Furthermore, themodel is consistent with the curious fact that closed-end funds, unlike operating firms,overwhelmingly list on exchanges, and that brokerage firms tend to list their own stocks on exchangeseven while bringing other firms public on insert Figure 1 approximately Listing Policy: Why Microsoft and Intel Do Not List on the NYSE One of the decisions faced by a publicly-pany is where its stock should be , a small firm first traded over-the-counter. As it grew larger, it then listed on theAMEX and ultimately on the However, the evolution of the over-the-counter market intothe Nasdaq market has changed this pattern. Over 900 firms that meet the NYSE listing requirementshave chosen to continue trading on Nasdaq, including household names such as Microsoft and trend away from NYSE-listing has e so pronounced that Nasd
