Author： Griffiths M.D. Smith B.F. Turnbull D.A.S. White R.W.
Publisher： Academic Press
ISSN： 1042-9573
Source： Journal of Financial Intermediation, Vol.7, Iss.4, 1998-10, pp. : 393-417
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Abstract
This paper examines the impact of reducing the tick size on market-making behavior on The Toronto Stock Exchange. The results indicate a significant decrease in the percentage of trades of fewer than 10,000 shares involving the upstairs traders and a significant increase in the percentage of trades of fewer than 1,000 share involving the designated market makers. Consistent with this finding, the upstairs traders earn significantly lower returns on non-block trades and the designated market markers earn lower returns on trades smaller than 1,000 shares. We conclude the tick size reduction benefits the trading public.
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