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Purpose -The purpose of this paper is to investigate how quotes originating via electronic communication networks (ECN)s affect trading costs. Design/methodology/approach -In order to investigate the relations between trading costs and quotation venue, the bid-ask spread is decomposed into its theoretical cost components associated with adverse selection, inventory handling, and order processing. Findings -Stoll's adverse selection costs of ECN-originated quotes relate positively to effective spreads, while Lin et al.'s adverse selection costs relate negatively to effective spreads. Originality/value -The paper shows how trading costs relate to trading venue choice by decomposing the bid-ask spread.

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Information provided by the US Department of Homeland Security regarding potential terrorist attacks significantly affects US Treasury securities markets. When the government announces heightened terror alert levels, investors' perceptions of risk increase and investors purchase 1-month and 1-year Treasury bills and 3-year, 5-year, 7-year, and 10-year US Treasuries in a "flight-to-quality" episode. Partial anticipation of increased threat level announcements is stronger than the anticipation of announcements regarding the federal funds rate during the 10 days prior to an announcement.

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