TY - JOUR
T1 - Tick Size, Spreads, and Liquidity
T2 - An Analysis of Nasdaq Securities Trading near Ten Dollars
AU - Bessembinder, Hendrik
N1 - Copyright:
Copyright 2004 Elsevier Science B.V., Amsterdam. All rights reserved.
PY - 2000/7
Y1 - 2000/7
N2 - Quoted and effective bid-ask spreads on Nasdaq are two to four cents per share narrower, ceteris paribus, when stocks trade with a smaller tick size below $10 per share. There is no evidence of a reduction in liquidity with the smaller tick size. The largest spread reductions occur for stocks whose market makers avoid odd-eighth quotes. This finding provides support for models implying that changes in the tick size can affect equilibrium spreads on a dealer market and indicates that the relation between tick size and market quality is more complex than the imposition of a constraint on minimum spread widths. Journal of Economic Literature Classification Numbers: G29, D34, N20.
AB - Quoted and effective bid-ask spreads on Nasdaq are two to four cents per share narrower, ceteris paribus, when stocks trade with a smaller tick size below $10 per share. There is no evidence of a reduction in liquidity with the smaller tick size. The largest spread reductions occur for stocks whose market makers avoid odd-eighth quotes. This finding provides support for models implying that changes in the tick size can affect equilibrium spreads on a dealer market and indicates that the relation between tick size and market quality is more complex than the imposition of a constraint on minimum spread widths. Journal of Economic Literature Classification Numbers: G29, D34, N20.
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U2 - 10.1006/jfin.2000.0288
DO - 10.1006/jfin.2000.0288
M3 - Article
AN - SCOPUS:0041526177
SN - 1042-9573
VL - 9
SP - 213
EP - 239
JO - Journal of Financial Intermediation
JF - Journal of Financial Intermediation
IS - 3
ER -