Tick size, market structure, and trading costs

Large tick sizes imposed on high-price stocks on the Korea Stock Exchange (KSE) are significant binding constraints on bid-ask spreads. Nearly 60% of quoted spreads are equal to the tick size for stocks with the largest tick size. The average spread of KSE stocks is smaller than that of the matched sample of New York Stock Exchange (NYSE) stocks, although the average spread of KSE stocks that belong to larger tick size groups is greater than that of matched NYSE stocks. These results suggest that the KSE’s electronic limit order market provides cheaper executions than the NYSE’s specialist system for our matched sample of stocks, and the KSE could further reduce trading costs if the large tick sizes imposed on highprice stocks are replaced with smaller ones.
Publisher
한국파생상품학회
Issue Date
2007
Language
ENG
Citation

한국파생상품학회 KDA(Korea Derivatives Association) 학술발표회

URI
http://hdl.handle.net/10203/6466
Appears in Collection
MT-Conference Papers(학술회의논문)
Files in This Item
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