By Web Communications
This article was written by Randy Horick.
In 1994, Bill Christie — now the Frances Hampton Currey Professor of Management in Finance at Owen — co-authored what The Economist described as “the first billion-dollar economics article.”
Christie, then a non-tenured member of the Owen faculty, and Paul Schultz, a colleague from Ohio State, jarred the financial world when they discovered compelling evidence that market makers at NASDAQ were profiting from collusion at the expense of investors.
Bill Christie, Frances Hampton Currey Professor of Management in Finance
“We stumbled on it,” Christie says modestly. As he recounts the story, he and Schultz had been looking at NASDAQ pricing data when they noticed that spreads for the largest and most active stocks, such as Apple, were almost always quoted in even eighths, suggesting a spread of at least a quarter dollar. To their surprise, they observed no odd-eighth spreads (1/8, 3/8, 5/8).
“With 60 market makers, that was simply not plausible,” Christie explains.
The “tacit collusion” the two junior professors documented was found to be explicit by a Justice Department investigation — “a complete lack of corporate governance,” Christie calls it. Ultimately, NASDAQ market makers paid roughly $1 billion in penalties, and the SEC forced the market to accept new order handling rules that provided investors with direct input into the pricing process.
Just as Christie says he happened upon the evidence that established his reputation as a researcher, his research career itself wasn’t something he originally planned. In the second year of his undergraduate program at Queen’s University in Kingston, Ontario, he says, “I took a course in investment management and found the material mesmerizing.” After starting his career in industry, he returned to school. “In a doctoral program, all you do is research,” he says. “It got into my blood.”
It’s still there.
In his Managerial Finance class (he has also taught Equities Markets, Bond Markets and Corporate Financial Policy), Christie’s passion for both his subject and the value of scholarly research are both obvious and, he hopes, even infectious.
As students in his Bond Markets class can attest, he believes that every MBA should have basic familiarity with academic research — a skill that he makes sure they have opportunities to practice. Working in small groups, students have to analyze and make a presentation on a scholarly article. That way, Christie says, students receive exposure to at least eight or nine research topics during the course.
Christie also seeks to impart some broader lessons based on his own experience. One is about corporate ethics and the costs of malfeasance. The collusion scandal, he notes, jolted NASDAQ into becoming not just a better governed organization but a more agile, competitive and customer-centered one.
“They’ve become a phenomenally innovative leader in technology,” Christie says. “They came out stronger.” (Adena Friedman, one of Christie’s former MBA students at Vanderbilt, applies some of what she learned from him as NASDAQ’s CEO.)
He also sees part of his teaching role as cultivating a love for Finance among his students. “When they see you bring a lot of enthusiasm to the class, they become more enthusiastic as a result,” he says. “For me, it’s about trying to make the material accessible and user-friendly.”
After taking his class, it’s not unusual for MBA students to take more courses in the subject or even pursue a concentration. “I try to make converts,” he smiles. “I guess you could say I evangelize finance.”
