Tick Size Pilot Program and the Information Structure of US Stock Markets

38 Pages Posted: 15 Oct 2019

See all articles by Bidisha Chakrabarty

Bidisha Chakrabarty

Saint Louis University - Richard A. Chaifetz School of Business

Justin Cox

University of Mississippi - Department of Finance

James Upson

University of Texas at El Paso

Date Written: October 4, 2019

Abstract

We evaluate the information structure of US markets after the implementation of the SEC tick pilot program. We find significant changes in the information structure of the market conditioned on the market fee structure. Maker-taker market volume flow increases in informational efficiency while inverted and dark markets remain unchanged for the first two pilot groups. In the third pilot group, inverted volume flow drops in informational efficiency while dark markets increase. Maker-taker volume efficiency remains constant for group 3 firms. Our analysis based on intermarket sweep orders and non-sweep orders on these markets indicates that ISO’s are the primary driver of changes in the information structure of markets. Our results indicate the implementation of the trade-at rule may harm price discovery.

Keywords: Tick size pilot program, Information structure, ISO, Price Discovery

JEL Classification: G12, G15, G24

Suggested Citation

Chakrabarty, Bidisha and Cox, Justin and Upson, James, Tick Size Pilot Program and the Information Structure of US Stock Markets (October 4, 2019). Available at SSRN: https://ssrn.com/abstract=3464659 or http://dx.doi.org/10.2139/ssrn.3464659

Bidisha Chakrabarty

Saint Louis University - Richard A. Chaifetz School of Business ( email )

3674 Lindell Blvd
St. Louis, MO MO 63108-3397
United States
3149773607 (Phone)
3149771479 (Fax)

HOME PAGE: http://business.slu.edu/departments/finance/faculty-staff/bidisha-chakrabarty

Justin Cox

University of Mississippi - Department of Finance ( email )

Oxford, MS 38677
United States

James Upson (Contact Author)

University of Texas at El Paso ( email )

500 West University
El Paso, TX 79968-0545
United States

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