Reducing tick size on the Stock Exchange of Singapore
Abstract
Minimum price changes, or tick sizes, are set by exchanges. Using theoretical and empirical models, previous researchers have concluded that transactions costs are increased unnecessarily if tick sizes are set higher than economic fundamentals justify. On July 18, 1994, the Stock Exchange of Singapore reduced the minimum tick size for stocks trading at $25 or more from $0.50 to $0.10. This event provides a unique opportunity to investigate the effects of an actual reduction in minimum tick size. We find that the reduction decreased bid-ask spreads significantly and thereby reduced transactions costs. © 1995.
Publication Title
Pacific-Basin Finance Journal
Recommended Citation
Lau, S., & McInish, T. (1995). Reducing tick size on the Stock Exchange of Singapore. Pacific-Basin Finance Journal, 3 (4), 485-496. https://doi.org/10.1016/0927-538X(95)00019-H
