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How Does Tick Size Affect Treasury Market Quality?

Michael J. Fleming, Francisco Ruela and Giang Nguyen

No 20200115, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: The popularity of U.S. Treasury securities as a means of pricing other securities, managing interest rate risk, and storing value is, in part, due to the efficiency and liquidity of the U.S. Treasury market. Any structural changes that might affect these attributes of the market are therefore of interest to market participants and policymakers alike. In this post, we consider how a 2018 change in the minimum price increment, or tick size, for the 2-year U.S. Treasury note affected market quality, following our recently updated New York Fed staff report.

Keywords: tick size; Treasury market; price efficiency; market liquidity (search for similar items in EconPapers)
JEL-codes: G1 (search for similar items in EconPapers)
Date: 2020-01-15
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