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The Impact of Pennies on the Market Quality of the Toronto Stock Exchange

Author

Listed:
  • Brian F. Smith
  • D. Alasdair S. Turnbull
  • Robert W. White

Abstract

Using detailed order flow data from the Toronto Stock Exchange, this paper finds no evidence that a smaller tick size lessens market liquidity for either small or large traders. Rather, there is evidence of lower trading costs, faster time to order execution, and greater price continuity. Consistent with a penny tick allowing a finer pricing grid search, there is an increase in the number of Change Former Orders and cancellations.

Suggested Citation

  • Brian F. Smith & D. Alasdair S. Turnbull & Robert W. White, 2006. "The Impact of Pennies on the Market Quality of the Toronto Stock Exchange," The Financial Review, Eastern Finance Association, vol. 41(2), pages 273-288, May.
    • Handle: RePEc:bla:finrev:v:41:y:2006:i:2:p:273-288
    DOI: 10.1111/j.1540-6288.2006.00141.x
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    Cited by:

    1. Dionne, Georges & Duchesne, Pierre & Pacurar, Maria, 2009. "Intraday Value at Risk (IVaR) using tick-by-tick data with application to the Toronto Stock Exchange," Journal of Empirical Finance, Elsevier, vol. 16(5), pages 777-792, December.
    2. Kiril Alampieski & Andrew Lepone, 2009. "Impact of a tick size reduction on liquidity: evidence from the Sydney Futures Exchange," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 49(1), pages 1-20, March.
    3. Murphy Jun Jie Lee, 2013. "The Microstructure of Trading Processes on the Singapore Exchange," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 4, July-Dece.

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