Trading volume: NASDAQ and the NYSE

Historically, reported trading volume has been overstated for NASDAQ stocks relative to NYSE stocks. Because NASDAQ volume may be overcounted, many researchers use an adjustment factor to make it comparable to NYSE volumes. Today, electronic communication networks account for about 75 percent of the trading volume for NASDAQ stocks. Many believe that the increased level of trading on ECNs and changes to the order-handling rules have lessened the discrepancy between the exchanges. To investigate, this study examined the relationship between reported trading volume to shares outstanding for a matched sample of NYSE and NASDAQ companies. The evidence indicates that the discrepancy has not diminished but widened.