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Relationship between tick size reduction and price information of open limit order book

Kenji Hatakenaka ()
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Kenji Hatakenaka: Graduate School of Economics, Osaka University

No 18-13, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: In this study, I examine the effects from tick size reduction in 2014 at Tokyo Stock Ex- change to price discovery of the limit order book by using tick-by-tick data from TOPIX100 stocks. Typically, both spreads and depths decline after tick size reduction. This fact has been confirmed in this study too. I examine the effects of changes in trader fs behavior which is caused by changes in the shape of limit order book. The results suggest that the information of an efficient price became more likely to be reflected by market orders than limit orders after tick size reduction.

Keywords: equity market; price discovery; market microstructure; high frequency trading. (search for similar items in EconPapers)
JEL-codes: G14 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2018-05
New Economics Papers: this item is included in nep-fmk and nep-mst
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