Effects of MiFID II on Stock Price Formation

42 Pages Posted: 10 Apr 2020 Last revised: 25 Aug 2020

See all articles by Mike Derksen

Mike Derksen

University of Amsterdam - Korteweg-de Vries Institute for Mathematics

Bas Kleijn

University of Amsterdam

Robin De Vilder

University of Amsterdam

Date Written: August 25, 2020

Abstract

This paper examines effects of MiFID II on European stock markets. We study the effects of the new tick size regime, both intraday and in the closing auction. An increase (decrease) in tick size is associated with a decrease (increase) in intraday liquidity, but a more (less) stable market. In the closing auction an increase in tick size has a positive effect on liquidity. Moreover, we report a positive relationship between tick size and transacted volume, in particular in the closing auction. Finally, closing auction volumes increased heavily since MiFID II and price formation in closing auctions became more efficient.

Keywords: MiFID II, price formation, price efficiency, tick size, closing auction, closing prices

JEL Classification: G10, G14, G15, G18, D44

Suggested Citation

Derksen, Mike and Kleijn, Bas and De Vilder, Robin, Effects of MiFID II on Stock Price Formation (August 25, 2020). Available at SSRN: https://ssrn.com/abstract=3559500 or http://dx.doi.org/10.2139/ssrn.3559500

Mike Derksen (Contact Author)

University of Amsterdam - Korteweg-de Vries Institute for Mathematics ( email )

Netherlands

Bas Kleijn

University of Amsterdam

Spui 21
Amsterdam, 1018 WB
Netherlands

Robin De Vilder

University of Amsterdam

Spui 21
Amsterdam, 1018 WB
Netherlands

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