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Subsidizing Liquidity with Wider Ticks: Evidence from the Tick Size Pilot Study
Journal of Empirical Legal Studies ( IF 2.346 ) Pub Date : 2020-05-22 , DOI: 10.1111/jels.12252
Robert P. Bartlett , Justin McCrary

Using data from the 2016–2018 Tick Size Pilot Study, we examine the efficacy of using wider tick sizes to subsidize market‐making in small capitalization stocks. We demonstrate that realized spreads decay quickly within the initial microseconds of a trade. The effect reduces the subsidy offered by wider tick sizes, particularly for non‐HFT market makers. The profit subsidy from wider tick sizes is also compromised by a significant shift in trading to “taker/maker” exchanges and to midpoint trading in non‐exchange venues. The pilot's exception for midpoint trades also accounts for the fact that nearly a third of trading remains in non‐exchange venues despite the inclusion of a trade‐at rule. Overall, these findings point to considerable inefficiencies in the pilot study's goal of using wider tick sizes to subsidize liquidity provision in small capitalization stocks.

中文翻译:

用更大的Ti角补贴流动性:来自T号规模试验研究的证据

我们使用2016-2018年“ ick价规模试点研究”的数据,研究了使用更宽的tick价规模补贴小型资本股的做市的有效性。我们证明,已实现的价差在交易的最初几毫秒内迅速衰减。这种效应减少了更广泛的报价规模所提供的补贴,特别是对于非高交易价做市商。交易量大幅度转向“承租人/制造商”交易所和非交易所场所的中点交易,也使得妥协规模较大的利润补贴也受到损害。飞行员对中点交易的例外也解释了这样一个事实,尽管其中包括了按交易规则,但仍有近三分之一的交易仍在非交易场所进行。总体而言,这些发现表明该试点研究的效率低下。
更新日期:2020-05-22
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