scholarly journals Tick size reduction and price clustering in a FX order book

2014 ◽  
Vol 416 ◽  
pp. 488-498 ◽  
Author(s):  
Mehdi Lallouache ◽  
Frédéric Abergel
Keyword(s):  
Size Reduction ◽  
Order Book ◽  
Tick Size ◽  
Price Clustering

Impact of Tick-Size Reduction on the Market Liquidity — Evidence from the Emerging Order-Driven Market

2008 ◽  
Vol 11 (04) ◽  
pp. 591-616 ◽  
Author(s):  
Tzung-Yuan Hsieh ◽  
Shaung-Shii Chuang ◽  
Ching-Chung Lin
Keyword(s):  
Stock Market ◽  
Empirical Studies ◽  
Market Liquidity ◽  
Size Reduction ◽  
Trading Costs ◽  
Tick Size ◽  
Binding Constraints ◽  
One Year ◽  
Developed Nations ◽  
Order Driven Market

Empirical studies on the influence of tick-size reduction towards market liquidity have focused almost exclusively on quote-driven markets in developed nations, and generally their findings are based on time periods of less than one year. This work investigates the influence of tick-size reduction and the relaxations of binding-constraint probability on market liquidity in the Taiwanese stock market, an emerging order-driven market, starting on March 1, 2005. The empirical results show that the spread, depth, market liquidity, and binding-constraint probability all decrease following the tick-size reduction, especially for low-priced stocks. These results can be attributed to relaxation of binding constraints. Additionally, stocks that are frequently traded, have larger market capitalization, or have restrictive binding constraints, experience considerable declines in spread, depth, and market liquidity following tick-size reduction. Trading activity plays an important role in explaining changes in spread, depth, market liquidity, and binding constraints. Thus, tick-size reduction in the Taiwanese Stock Market can increase market efficiency and reduce the investors' trading costs.

scholarly journals Estimating the effect of transaction costs using tick-size as a proxy

2021 ◽  
Author(s):  
Espen Sirnes
Keyword(s):  
Transaction Costs ◽  
Transaction Cost ◽  
Stock Exchange ◽  
International Markets ◽  
Second Step ◽  
Order Book ◽  
Local Data ◽  
Tick Size ◽  
The Third ◽  
Intraday Data

A method is proposed for estimating the effect of transaction costs on volatility, using the tick-size as proxy. The method follows three steps: 1) collect only the cases where the tick-size changes from one regime to another, 2) estimate the effect with and without the order book size, and 3) use local data on tick-size and volatility, but instruments from international markets.  The first step handles stationarity and dependence. The second step is used to infer the effect of a symmetric transaction cost as tick-size is a revenue and not a cost for liquidity providers. A regression with and without the order book may therefore indicate how much this asymmetry is likely to affect the result. The third step handles endogeneity. The method is applied on intraday data from the Norwegian Stock Exchange (OSE).  The results show that both the tick-size and inferred transaction costs seems to have surprisingly little impact on volatility.

Sign in / Sign up

Export Citation Format

Share Document