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Deviations in expected price impact for small transaction volumes under fee restructuring

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Listed:
  • Harvey, M.
  • Hendricks, D.
  • Gebbie, T.
  • Wilcox, D.

Abstract

We report on the occurrence of an anomaly in the price impacts of small transaction volumes following a change in the fee structure of an electronic market. We first review evidence for the existence of a master curve for price impact on the Johannesburg Stock Exchange (JSE). On attempting to re-estimate a master curve after fee reductions, it is found that the price impact corresponding to smaller volume trades is greater than expected relative to prior estimates for a range of listed stocks. We show that a master curve for price impact can be found following rescaling by an appropriate liquidity proxy, providing a means for practitioners to approximate price impact curves without onerous processing of tick data.

Suggested Citation

  • Harvey, M. & Hendricks, D. & Gebbie, T. & Wilcox, D., 2017. "Deviations in expected price impact for small transaction volumes under fee restructuring," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 471(C), pages 416-426.
    • Handle: RePEc:eee:phsmap:v:471:y:2017:i:c:p:416-426
    DOI: 10.1016/j.physa.2016.11.042
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    References listed on IDEAS

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    1. Donovan Platt & Tim Gebbie, 2016. "The Problem of Calibrating an Agent-Based Model of High-Frequency Trading," Papers 1606.01495, arXiv.org, revised Mar 2017.
    2. Platt, Donovan & Gebbie, Tim, 2018. "Can agent-based models probe market microstructure?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 503(C), pages 1092-1106.

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