Stock exchange operators compete for order flow by setting "make" fees for limit orders and "take" fees for market orders. When traders quote continuous prices, they can choose prices that perfectly neutralize any fee division, and traders stream to the exchange with the lowest total fee. The...

We argue that a one-penny minimum tick size for all stocks priced above $1 (SEC rule 612) encourages high-frequency trading and taker/maker–fee markets. We find that non-high frequency traders (non-HFTers) are 2.62 times more likely than HFTers to provide best prices, thereby establishing...