Tick Size and Market Quality
David C. Porter and
Daniel G. Weaver
Financial Management, 1997, vol. 26, issue 4
All of the US stock markets have reduced their respective minimum tick sizes. Since the three major US markets, the American Stock Exchange (AMEX), New York Stock Exchange (NYSE), and Nasdaq, all have different order-priority systems, the impact of the tick-size reduction on spread width, as well as other aspects of market quality, can differ across the markets. Given that previous research has established a link between spread width and a firm's cost of capital, this differing impact is important to firms in their exchange listing decision. This study examines changes in market quality across two different priority systems, price-time and price-sharing, following a reduction in the minimum tick size by the Toronto Stock Exchange (TSE) on April 15, 1996. We find that, following the reduction in minimum tick size on the TSE, spreads generally narrow and quoted depths decline for both priority systems. (Depth is defined as the total number of shares offered or sought at a price.) The effect is greatest on low-priced, high-volume stocks.
References: Add references at CitEc
Citations: View citations in EconPapers (29) Track citations by RSS feed
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:fma:fmanag:porter97
Access Statistics for this article
Financial Management is currently edited by Bill Christie
More articles in Financial Management from Financial Management Association University of South Florida 4202 E. Fowler Ave. COBA #3331 Tampa, FL 33620. Contact information at EDIRC.
Bibliographic data for series maintained by Courtney Connors (). This e-mail address is bad, please contact .