Penny Pricing and the Components of Spread and Depth Changes

• Main Authors: DING, David K., Chuang, K.H., Chearoenwong, C.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2004
• Subjects: Binding constraint; tick size; stepping ahead; spreads; depths; decimal pricing; Business; Finance and Financial Management; Portfolio and Security Analysis
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/1156; https://ink.library.smu.edu.sg/context/lkcsb_research/article/2155/viewcontent/PennyPricing_2004_av.pdf
• Institution: Singapore Management University

Recent studies show that decimal pricing led to significant reductions in the spread and depth on the NYSE. In this paper, we examine how the observed changes in the spread and depth can be attributed to different factors. We show that stocks with higher proportions of one-tick spreads and odd-sixte...