Decimal Trading and Market Impact

Chakravarty, Sugato; Harris, Stephen P.; Wood, Robert A.

doi:10.2139/ssrn.266877

Cited by 40 publications

(20 citation statements)

References 34 publications

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“…For example, Goldstein and Kavajecz (2000) and Jones and Lipson (2001) report that liquidity demanders trading large orders are worse off. In contrast, Bacidore et al (2003) and Chakravarty et al (2001) find no significant change. Thus the appropriateness of reducing tick size is still an unsolved issue even for markets from which most of the empirical evidence comes.…”

Section: Discussionmentioning

confidence: 71%

Price resolution in an emerging market: Evidence from the Istanbul Stock Exchange

Booth

Aydın

2006

The European Journal of Finance

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Section: Discussionmentioning

confidence: 71%

Price resolution in an emerging market: Evidence from the Istanbul Stock Exchange

Booth

Aydın

2006

The European Journal of Finance

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“…Focusing mainly on the bid-ask spreads and quoted depths at the inside quotes, a number of studies deliver a mixed verdict on the impact of tick size reductions on market liquidity. For example, Bacidore (1997), Porter and Weaver (1997), and Chakravarty, Harris, and Wood (2001), among others, show that both the bid-ask spread and quoted depth decline after a tick size reduction. However, Ahn, Cao, and Choe (1996) and Ronen and Weaver (2001) find that after a tick reduction from eighths to sixteenths on the AMEX, the bidask spreads declined, but the market depth did not decrease.…”

Section: Literature On Tick Size Reductionsmentioning

confidence: 99%

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

Kurov

Zabotina

2004

J. Fut. Mark.

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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.

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“…These studies are either broad investigations that look at measures such as spread, depth, volume and liquidity for different market centers (e. g. Chordia, Roll and Subrahmanyam (2000) and Stoll (2000)). Or they are more specific studies that concentrate on how different market structures respond to important rule changes (e. g. Chakravarty, Wood and Harris (2002) investigate the impact of decimalization).…”

Section: Literature Reviewmentioning

confidence: 99%