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Tick Size Reduction (tick + size_reduction)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	100%

Selected Abstracts

Tick size reduction, execution costs, and informational efficiency in the regular and E-mini Nasdaq-100 index futures markets

THE JOURNAL OF FUTURES MARKETS, Issue 9 2008
Alexander Kurov
On April 2, 2006, the Chicago Mercantile Exchange reduced the minimum tick size of the floor-traded and E-mini Nasdaq-100 futures from 0.5 to 0.25 index points. This study examines the effect of this change in the contract design on execution costs, informational efficiency, and price discovery. The results show a significant reduction in the effective spreads in both of the contract markets but especially in the electronically traded E-mini futures. The paper also finds that the tick size reduction has improved price discovery and informational efficiency in the E-mini futures market. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28:871,888, 2008 [source]

Impact of a tick size reduction on liquidity: evidence from the Sydney Futures Exchange

ACCOUNTING & FINANCE, Issue 1 2009
Kiril Alampieski
G12 Abstract This paper examines the impact of a reduction in the minimum price increment on liquidity and execution costs in a futures market setting. In 2006, the Sydney Futures Exchange halved the minimum tick in the 3 Year Commonwealth Treasury Bond Futures. Results indicate that bid-ask spreads are significantly reduced after the change. Quoted depth, both at the best quotes and visible in the limit order book, is significantly lower after the tick reduction. Further analysis reveals that execution costs are significantly reduced after the change. We conclude that a tick size reduction improves liquidity and reduces execution costs in a futures market setting. [source]

Tick size reduction, execution costs, and informational efficiency in the regular and E-mini Nasdaq-100 index futures markets

Is it time to reduce the minimum tick sizes of the E-mini futures?

THE JOURNAL OF FUTURES MARKETS, Issue 1 2005
Alexander Kurov
On the Chicago Mercantile Exchange (CME), so-called "E-mini" index futures contracts trade on the electronic GLOBEX trading system alongside the corresponding full-size contracts that trade on the open outcry floor. This paper finds that the current minimum tick sizes of the E-mini S&P 500 and E-mini Nasdaq-100 futures contracts act as binding constraints on the bid-ask spreads by not allowing the spreads to decline to competitive levels. We also find that, while exchange locals trade very actively on GLOBEX, they do not tend to act as liquidity suppliers. Taken together, our empirical results suggest that it is time for the CME to consider decreasing the minimum tick sizes of the S&P 500 and Nasdaq-100 E-mini futures contracts. A tick size reduction is likely to result in lower trading costs in the E-mini futures markets. © 2005 Wiley Periodicals, Inc. Jrl Fut Mark 25:79,104, 2005 [source]

Impact of the Change in Tick Size on Transaction Costs and Liquidity: An Empirical Investigation of the Taiwan Stock Exchange,

ASIA-PACIFIC JOURNAL OF FINANCIAL STUDIES, Issue 4 2010
Su-Wen Kuo
C12; G15 Abstract The minimum price variation on the Taiwan Stock Exchange reduced for most price categories on March 1, 2005. The present paper simultaneously examines the institutional and endogenous impacts of tick size changes on transaction costs, market liquidity, and trading activity. The empirical evidence suggests that following a reduction in tick size, uniform declines are discernible in transaction costs and market liquidity. In particular, those stocks with a larger relative tick size reduction, higher trading volume, and higher order handling cost components have greater reductions in spread and market depth. Moreover, endogenous tick size reductions have an adverse effect on the trading activity for low-price stocks, due to the relative disadvantage in explicit transaction costs. Finally, the present study observes a general diminution in trade size resulting from a reduction in tick size in the Taiwan Stock Exchange. This study attributes plausible rationales to the fact that after tick size reductions, informed traders employ a smaller trade size to hide private information, or front-runners place a smaller trade size to avoid market turbulence. [source]