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Deviations in expected price impact for small transaction volumes under fee restructuring

M. Harvey, D. Hendricks, T. Gebbie and D. Wilcox

Physica A: Statistical Mechanics and its Applications, 2017, vol. 471, issue C, 416-426

Abstract: We report on the occurrence of an anomaly in the price impacts of small transaction volumes following a change in the fee structure of an electronic market. We first review evidence for the existence of a master curve for price impact on the Johannesburg Stock Exchange (JSE). On attempting to re-estimate a master curve after fee reductions, it is found that the price impact corresponding to smaller volume trades is greater than expected relative to prior estimates for a range of listed stocks. We show that a master curve for price impact can be found following rescaling by an appropriate liquidity proxy, providing a means for practitioners to approximate price impact curves without onerous processing of tick data.

Keywords: Price impact; Fee structure change; Market regulation; Master curve; Market microstructure; Electronic limit order book (search for similar items in EconPapers)
Date: 2017
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Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

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