The Impact of Fractional Trading on Order Book Dynamics

We study the impact of fractional trading (FT) on the price levels and order book dynamics observed in stock markets. Using Nasdaq data feed at a minute frequency, we show that there has been a significant increase in the slope of the price-volume structure and average tick size. In some cases, there has been an increase in the number of steps required to place a limit order post-FT. Our results suggest that increased demand for stocks led by easiness to trade stocks and FT impacts the order book's price formation process and price-volume structure