Related papers: Tick size and price diffusion
The tick size, which is the smallest increment between two consecutive prices for a given asset, is a key parameter of market microstructure. In particular, the behavior of high frequency market makers is highly related to its value. We…
We demonstrate that the lowest possible price change (tick-size) has a large impact on the structure of financial return distributions. It induces a microstructure as well as it can alter the tail behavior. On small return intervals, the…
In this work, we provide a framework linking microstructural properties of an asset to the tick value of the exchange. In particular, we bring to light a quantity, referred to as implicit spread, playing the role of spread for large tick…
Tick-sizes not only influence the granularity of the price formation process but also affect market agents' behavior. We investigate the disparity in the microstructural properties of the Limit Order Book (LOB) across a basket of assets…
While the long-ranged correlation of market orders and their impact on prices has been relatively well studied in the literature, the corresponding studies of limit orders and cancellations are scarce. We provide here an empirical study of…
It is known that the impact of transactions on stock price (market impact) is a concave function of the size of the order, but there exists little quantitative theory that suggests why this is so. I develop a quantitative theory for the…
In order to investigate the origin of large price fluctuations, we analyze stock price changes of ten frequently traded NASDAQ stocks in the year 2002. Though the influence of the trading frequency on the aggregate return in a certain time…
This paper examines effects of MiFID II on European stock markets. We study the effects of the new tick size regime, both intraday and in the closing auction. An increase (decrease) in tick size is associated with a decrease (increase) in…
This article provides a simple explanation of the asymptotic concavity of the price impact of a meta-order via the microstructural properties of the market. This explanation is made more precise by a model in which the local relationship…
We investigate the statistical properties of the EBS order book for the EUR/USD and USD/JPY currency pairs and the impact of a ten-fold tick size reduction on its dynamics. A large fraction of limit orders are still placed right at or…
In this article we revisit the classic problem of tatonnement in price formation from a microstructure point of view, reviewing a recent body of theoretical and empirical work explaining how fluctuations in supply and demand are slowly…
We study the cause of large fluctuations in prices in the London Stock Exchange. This is done at the microscopic level of individual events, where an event is the placement or cancellation of an order to buy or sell. We show that price…
Using Trades and Quotes data from the Paris stock market, we show that the random walk nature of traded prices results from a very delicate interplay between two opposite tendencies: long-range correlated market orders that lead to…
Statistical properties of an order book and the effect they have on price dynamics were studied using the high-frequency NASDAQ Level II data. It was observed that the size distribution of marketable orders (transaction sizes) has power law…
We investigate the random walk of prices by developing a simple model relating the properties of the signs and absolute values of individual price changes to the diffusion rate (volatility) of prices at longer time scales. We show that this…
We look at the effect of the tick size changes on the TOPIX 100 index names made by the Tokyo Stock Exchange on Jan-14-2014 and Jul-22-2104. The intended consequence of the change is price improvement and shorter time to execution. We look…
We observe the effects of the three different events that cause spread changes in the order book, namely trades, deletions and placement of limit orders. By looking at the frequencies of the relative amounts of price changing events, we…
Microstructure of market dynamics is studied through analysis of tick price data. Linear trend is introduced as a tool for such analysis. Trend arbitrage inequality is developed and tested. The inequality sets limiting relationship between…
The tick value is a crucial component of market design and is often considered the most suitable tool to mitigate the effects of high frequency trading. The goal of this paper is to demonstrate that the approach introduced in Dayri and…
How and why stock prices move is a centuries-old question still not answered conclusively. More recently, attention shifted to higher frequencies, where trades are processed piecewise across different timescales. Here we reveal that price…