In this paper, we determine whether each bid (ask)
quote reflects the trading interest of the
specialist, limit order traders, or both for a
sample of NYSE stocks in 1991. We then compare
Nasdaq spreads with NYSE spreads that reflect the
trading interest of the specialist. Our empirical
results show that the average Nasdaq spread is
significantly larger than the average NYSE
specialist spread. We find that, on average, 49% of
the difference between Nasdaq and specialist spreads
is due to the differential use of even-eighth quotes
between Nasdaq dealers and NYSE specialists. We also
find that the NYSE specialist spread is
significantly larger than the limit order spread,
although NYSE specialists and limit order traders
are similiar in their use of even-eighth quotes.