Title

Eighths, Sixteenths, and Market Depth: Changes in Tick Size and Liquidity Provision on the NYSE

(with Kenneth A. Kavajecz)

Selected papers by Michael A. Goldstein are available on SSRN at http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=54604

Publication

Journal of Financial Economics

DOI*

http://dx.doi.org/10.1016/S0304-405X(99)00061-6

Abstract

Using limit order data provided by the NYSE, we investigate the impact of reducing the minimum tick size on the liquidity of the market. While both spreads and depths (quoted and on the limit order book) declined after the NYSE's change from eighths to sixteenths, depth declined throughout the entire limit order book as well. The combined effect of smaller spreads and reduced cumulative limit order book depth has made liquidity demanders trading small orders better off; however, traders who submitted larger orders in lower volume stocks did not benefit, especially if those stocks were low priced.

Disciplines

Portfolio and Security Analysis

Recommended Citation

Goldstein, Michael A., and Kenneth A. Kavajecz. 2000. "Eighths, sixteenths, and market depth: changes in tick size and liquidity provision on the NYSE." Journal of Financial Economics 56, no. 1: 125-149.

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