We model a public limit order book (PLB) with rational investors choosing to supply or demand liquidity. Following a reduction in the tick size the effects on PLB's market quality depend on the liquidity of the stocks. Spread improves for tick-constrained stocks and deteriorates for...

We propose a parsimonious measure based solely on daily stock returns to characterize the severity of microstructure frictions at the individual stock level and assess the impact of frictions on the cross section of stock returns. Stocks with the largest frictions command a value-weighted return...

Regulators, exchanges, and politicians are considering reining in maker-taker pricing, which is used as a competitive tool by trading venues to acquire order flow. Examining the 2013 reduction in trading fees operated by BATS on its European venues, we document significant effects on market...

The U.S. equity markets recently increased the tick size from one to five cents for smaller capitalization stocks. We show that the larger tick size raised the cost for retail-sized liquidity demanding orders by almost fifty percent, and raised profits to liquidity providers by forty percent....

After a natural experiment is first used, other researchers often reuse the setting, examining different outcome variables. We examine the consequences of reusing an experimental setting using two extensively studied natural experiments, business combination laws and the Regulation SHO pilot. We...

This paper describes regularities in the intraday spreads and prices quoted by dealers on the London Stock Exchange. It develops a measure of spread-related transaction costs, one that recognizes dealers' willingness to price trades within their quoted spreads. This measure of transaction costs...