Market fairness and efficiency: Evidence from the Tokyo Stock Exchange

David Kemme (), Thomas H. McInish and Jiang Zhang

Journal of Banking & Finance, 2022, vol. 134, issue C

Abstract: In 2015 the Tokyo Stock Exchange (TSE) implemented Arrowhead Renewal improvements (ARI) that reduced latency from about one millisecond to less than 0.5 ms. Simultaneously, the ARI introduced new risk management functions to improve market fairness by reducing manipulative trading strategies. We find a dramatic improvement in market fairness as proxied by marking-the-close incidents, which declined by 61.19%. We find a much smaller improvement in market efficiency. Specifically, there was a reduction in the effective (quoted) spread of 6.45% (5.79%). The most dramatic improvement in market quality (fairness and efficiency) was for low-tick-size and high-market-capitalization stocks.

Keywords: Market fairness; Market efficiency; High-frequency trading; Liquidity; Tick size; Tokyo Stock Exchange (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 G28 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426621002612
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:134:y:2022:i:c:s0378426621002612

DOI: 10.1016/j.jbankfin.2021.106309

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().