The Information Content of the Order Book and Tick Size Reduction: Evidence from the Taiwan Stock Exchange

2009 ◽  
Author(s):  
Hsiu-Chuan Lee ◽  
Cheng-Yi Chien
Keyword(s):  
Information Content ◽  
Stock Exchange ◽  
Size Reduction ◽  
Order Book ◽  
Tick Size ◽  
Taiwan Stock Exchange

The information content of the thinner order book following tick size reduction

2014 ◽  
Vol 40 (3) ◽  
pp. 218-233
Author(s):  
Cheng-Yi Chien ◽  
Tzu-Hsiang Liao ◽  
Hsiu-Chuan Lee
Keyword(s):  
Information Content ◽  
Stock Exchange ◽  
Limit Order Book ◽  
Order Book ◽  
Tick Size ◽  
Limit Order ◽  
Content Type ◽  
Taiwan Stock Exchange ◽  
Using Data ◽  
The Impact

Purpose – This paper aims to examine the impact of a reduction in tick size on the information content of the order book by using data from the Taiwan Stock Exchange (TWSE). Design/methodology/approach – To estimate the information content of the order book, the modified information share proposed by Hasbrouck and extended by Lien and Shrestha is used in this paper. Findings – The empirical results show that the limit order book is informative. Furthermore, the results indicate that a reduction in tick size will decrease the information content of the order book and the decrease in the information content of the order book is positively related to the thinner order book. Originality/value – This paper suggests that, in order to enhance the information content of the order book, the TWSE should disclose the full limit order book.

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.

Tick Size Reduction and Order Submission Strategies on the Australian Stock Exchange

2009 ◽  
Author(s):  
Huu Nhan Duong ◽  
Petko S. Kalev ◽  
Troy O’Dwyer ◽  
Edwin D. Maberly
Keyword(s):  
Stock Exchange ◽  
Size Reduction ◽  
Tick Size

scholarly journals Tick Size Reduction and the Components of the Bid-Ask Spread on the Taiwan Stock Exchange

2016 ◽  
Vol 8 (1) ◽  
pp. 79 ◽  
Author(s):  
Su-Wen Kuo
Keyword(s):  
Stock Exchange ◽  
Emerging Market ◽  
High Price ◽  
Tick Size ◽  
Cross Sectional ◽  
Order Processing ◽  
Taiwan Stock Exchange ◽  
Developed Markets ◽  
Bid Ask Spread ◽  
Processing Component

We examined the effect of reduced tick size on spread and its various components on Taiwan Stock Exchange (TWSE). The TWSE stands for a representative order-driving call mechanism in the emerging market. The noticeable market features of the TWSE render our findings on the effect of tick-size changes useful in combination with those reported in studies on developed markets. Our evidence strongly indicated that the traded spread and the order-processing component declined after tick size was reduced, whereas the asymmetric information component exhibited less significant changes. We documented a relatively high proportion of the order-processing component of the TWSE compared with that observed in developed markets after tick size was reduced. The cross-sectional regression analysis results indicated that stocks with high binding constraints, a high price, and high trading activity generated substantial savings on the order-processing component after tick-size conversion. Our empirical results highlight the important contributions of reduced tick size on market efficiency specifically in an emerging call market setting.

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