Eighths, Sixteenths, and Market Depth: Changes in Tick Size and Liquidity Provision on the NYSE

Posted: 9 Apr 2007

Multiple version iconThere are 2 versions of this paper

Abstract

Using limit order data provided by the NYSE, we investigate the impact of reducing the minimum tick size on the liquidity of the market. While both spreads and depths (quoted and on the limit order book) declined after the NYSE's change from eighths to sixteenths, depth declined throughout the entire limit order book as well. The combined effect of smaller spreads and reduced cumulative limit order book depth has made liquidity demanders trading small orders better off; however, traders who submitted larger orders in lower volume stocks did not benefit, especially if those stocks were low priced.

Keywords: Tick size, Limit Orders, Depth, Liquidity Provision

JEL Classification: G14

Suggested Citation

Goldstein, Michael A. and Kavajecz, Kenneth A., Eighths, Sixteenths, and Market Depth: Changes in Tick Size and Liquidity Provision on the NYSE. Journal of Financial Economics, Vol. 56, No. 1, pp. 125-149, April 2000. Available at SSRN: https://ssrn.com/abstract=979088

Michael A. Goldstein (Contact Author)

Babson College - Finance Division ( email )

320 Tomasso Hall
Babson Park, MA 02457-0310
United States
781-239-4402 (Phone)
781-239-5004 (Fax)

HOME PAGE: http://faculty.babson.edu/goldstein/

No contact information is available for Kenneth A. Kavajecz

Register to save articles to
your library

Register

Paper statistics

Abstract Views
640
PlumX Metrics