U.S. Tick Size Pilot

Fisher College of Business Working Paper No. 2017-03-018

Charles A Dice Center Working Paper No. 2017-18

61 Pages Posted: 22 Sep 2017 Last revised: 17 Mar 2019

See all articles by Barbara Rindi

Barbara Rindi

Bocconi University and IGIER and Baffi Carefin

Ingrid M. Werner

The Ohio State University - Fisher College of Business; CEPR

Date Written: March 14, 2019

Abstract

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. The bulk of the effects occurred for tick-constrained stocks for which trading costs more than doubled. Trading costs for unconstrained stocks declined by more than ten percent. Finally, we document significant changes in market quality for control stocks relative to similar stocks that were not part of the study.

Keywords: U.S. Tick Size Pilot, JOBS Act, tick size, market quality, trading activity, liquidity provision

JEL Classification: G12, G14

Suggested Citation

Rindi, Barbara and Werner, Ingrid M., U.S. Tick Size Pilot (March 14, 2019). Fisher College of Business Working Paper No. 2017-03-018, Charles A Dice Center Working Paper No. 2017-18, Available at SSRN: https://ssrn.com/abstract=3041644 or http://dx.doi.org/10.2139/ssrn.3041644

Barbara Rindi

Bocconi University and IGIER and Baffi Carefin ( email )

Via Roentgen 1
Milan, 20136
Italy
+39 58365328 (Phone)

HOME PAGE: http://faculty.unibocconi.eu/barbararindi

Ingrid M. Werner (Contact Author)

The Ohio State University - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-292-6460 (Phone)
614-292-2418 (Fax)

CEPR ( email )

London
United Kingdom

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