Inverted fee structures, tick size, and market quality

• 成果类型: Article
• 署名作者: Comerton-Forde, Carole; Gregoire, Vincent; Zhong, Zhuo
• 署名单位: Universite de Montreal; HEC Montreal; University of Melbourne
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2019.03.005
• 发表日期: 2019
• 页码: 141-164
• 关键词: Exchange fees; Inverted venues; Dark trading

摘要

Stock exchanges compete for order flow through their fee models. A traditional model pays rebates to liquidity suppliers, and an inverted model pays rebates to liquidity demanders. Using a regulatory intervention to examine the interaction between tick size, restrictions on dark trading, and exchange fees, we show that traders use inverted venues to adjust for suboptimal tick sizes. Increased inverted venue activity improves pricing efficiency and liquidity, especially when the tick size is binding. We show that the sub-tick price improvement offered by inverted venues enhances competition for liquidity provision and increases information impounded into prices through nonmarketable limit orders. (C) 2019 Elsevier B.V. All rights reserved.