Tick ​​size And Market Quality

Using tick-by-tick trade and quote data around the onset of reduction in minimum tick size of Shanghai closed-end funds, we examine the impact of the reduction in minimum tick size on market quality.Firstly, We find that both the quoted bid-ask spreads and depths decline dramatically in all twenty-five closed-end funds following the reduction in minimum tick size. We also find trade frequency increase. Secondly,our analysis shows the reduction in minimum tick size cause an decrease in the variance of rice.Finaly, We find that the minimum tick size influence the market efficency and the reduction in minimum tick size increase the market information efficency.This paper consists of five chapters:In chapter 1 ,we firstly introduce the tick size rules of security market.and then introduce four aspects of the market quality market liquidity,volatility , market efficency and transparency.In chapter 2,we examine the effect of the reduction in minmum tick size on market liquidity.In chapert 3,we construct a new model which bases on the tick-by-tick trade data about volidity of price.Using this model we check the impact of the reduction in minimum tick size on the volidity of price.In chapter 4,we check the effect of the reduction in minimum tick size on market efficency.In chapter 5,we sum up the conclusions of this paper and point out both the innovations and the deficiencies of this paper.