92 research outputs found
One size fits all? High frequency trading, tick size changes and the implications for exchanges: market quality and market structure considerations
This paper offers a systematic review of the empirical literature on the implications of tick size changes for exchanges. Our focus is twofold: first, we are concerned with the market quality implications of a change in the minimum tick size. Second, we are interested in the implications of changes in the minimum tick size on market structure. We show that there is a large body of empirical literature that documents a decrease in transaction costs following a decrease in the minimum tick size. However, even though market liquidity increases, the incentive to provide market making activities decreases. We document a strong link between the minimum tick size regulations and the recent increase in high frequency trading activity. A smaller tick enhances the price discovery process. However, the question of how multiple tick size regimes affect market liquidity in a fragmented market remains to be answered. Finally, we identify topics for future research; we discuss the empirical literature on the minimum trade unit and the recent calls for a minimum resting time for quotes
The Impact of Tick Size on Market Quality: An Empirical Investigation of the Stock Exchange of Hong Kong
The Impact of Tick Size Reduction on Liquidity and Order Strategy: Evidence from the Jakarta Stock Exchange (JSX)
Execution Quality for Institutional Orders Routed to Nasdaq Dealers Before and After Decimals
Price transmission dynamics between informationally linked securities
The paper examines whether location of trade matters in the pricing of internationally listed securities by examining the price dynamics of stocks listed on the Greek and the two German stock exchanges, Frankfurt and Berlin. Through the investigation of the various possibilities of short-run and long-run arbitrage profits it is found that the prices of stocks in the German markets are priced with reference to the Greek market, implying that the location of trade does not matter and that there is a certain degree of market integration. In contrast, it is found that the price discovery process takes place in the German markets, although most of the trading volume is concentrated in the Greek market.
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