Tick Size Is little more than an Impediment to Liquidity Trading: Theory and Market Experimental Evidence

Increasing the Tick: Examining the Impact of the Tick Size Change on Maker‐Taker and Taker‐Maker Market Models

“…However, our paper differs by using a difference‐in‐difference approach in determining changes in market share following the tick size, providing evidence of increasing order and trading flow to inverted fee models (taker‐maker models) as well as by each exchange—a finding consistent with Lin, Swan and Mollica (). Additionally, while both Lin, Swan and Mollica () and Comerton‐Forde, Gregoire and Zhong () examine the role of market quality across maker‐taker and taker‐maker fee models, our paper focuses on the changes in hidden and algorithmic trading on lit trading venues as a direct test of several recent theoretical and empirical works. We focus on lit trading venues as opposed to dark trading venues as lit venues are transparent to market participants, displaying prices at which participants are willing to trade.…”

Subsidizing Liquidity with Wider Ticks: Evidence from the Tick Size Pilot Study

“…Three other papers expressly examine how the pilot affected the incidence of market activity across competing venues. Lin et al () find that the first two treatment arms increased trading on non‐exchange venues, while TG3 drove trading to exchanges. Focusing on the effect of the trade‐at rule, Farley et al () similarly find that the market share of trading on dark venues fell from 35 percent to 23 percent for securities assigned to TG3.…”

“…By expressly grappling with the midpoint exception, we help explain why, despite a quintupling of the tick size, average daily market maker profits increased by just 40 percent. Moreover, Comerton‐Forde et al (), Lin et al (), and Cox et al () each examine trading only with respect to the final months of 2016. These sample selection choices may explain why Comerton‐Forde et al () find no change in the market share of trading for TG2 securities and Cox et al () find no statistically significant decrease in overall maker/taker trading volume.…”

Impact of MiFID II tick‐size regime on equity markets—Evidence from the LSE

“…Several recent studies, including the works of Albuquerque et al (2017), Hansen et al (2017), Lin et al (2017); Cox et al (2019), Griffith and Roseman (2019), Comerton‐Forde et al (2019), Rindi and Werner (2019), Bartlett and McCrary (2020) and Chung et al (2020) focus on tick‐size increases associated with the United States (US) Tick‐Size Pilot Program. Cox et al (2019) focus on the order flow between different fee models.…”