Tick size regulation and sub-penny trading

Sabrina Buti; Barbara Rindi; Yuanji Wen; Ingrid M. Werner

We show that following a tick size reduction in a decimal public limit order book (PLB) market quality and welfare fall for illiquid but increase for liquid stocks. If a Sub-Penny Venue (SPV) starts competing with a penny-quoting PLB, market quality deteriorates for illiquid, low priced stocks, while it improves for liquid, high priced stocks. As all traders can demand liquidity on the SPV, traders' welfare increases. If the PLB facing competition from a SPV lowers its tick size, PLB spread and depth decline and total volume and welfare increase irrespective of stock liquidity

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Year of publication:	2013
Authors:	Buti, Sabrina ; Rindi, Barbara ; Wen, Yuanji ; Werner, Ingrid M.
Publisher:	Columbus, Ohio : Charles A. Dice Center for Research in Financial Economics
Subject:	Regulierung \| Regulation \| Finanzmarktregulierung \| Financial market regulation \| Wertpapierhandel \| Securities trading \| Geld-Brief-Spanne \| Bid-ask spread

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Extent:	Online-Ressource (66 S.) graph. Darst.
Series:	Fisher College of Business working paper series. - Columbus, Ohio : [Verlag nicht ermittelbar], ZDB-ID 2189279-9. - Vol. 2013-14 Charles A. Dice Center Working Paper ; No. 2013-14 Fisher College of Business working paper series. - Columbus, Ohio : [Verlag nicht ermittelbar], ZDB-ID 2412551-9. - Vol. 2013-03-14
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Arbeitspapier ; Working Paper ; Graue Literatur ; Non-commercial literature
Language:	English
Notes:	Systemvoraussetzungen: Acrobat Reader
Other identifiers:	10.2139/ssrn.2324862 [DOI]
Classification:	G10 - General Financial Markets. General ; G12 - Asset Pricing ; G20 - Financial Institutions and Services. General ; G23 - Pension Funds; Other Private Financial Institutions ; G24 - Investment Banking; Venture Capital; Brokerage
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10010227726