It’s been a little over 3 months since the US Tick size pilot began, arguably the biggest change to US markets in over a decade. In that time at least three parties have provided feedback on the implications of the change, namely ourselves, Convergex and ITG, all of whom have been reported through the Tabb Forum.
The CMCRC updates (available at www.mqdashboard.com) uniquely allow interested parties to freely:
1. Observe updates on a T+5 basis at the following web address (www.mqdashboard.com) under “Case Studies”.
2. Choose individual markets (e.g. IEX, NYSE, Nasdaq) or groups of markets (e.g. lit, taker-maker or maker-taker) and observe the results for that market or group of markets across the 3 treatment and control groups.
3. View individual metrics of market quality over time periods of particular interest to the user. Note at Tabb Forum readers can also suggest new metrics to be added to the analysis.
4. Observe an overall score of market quality pre and post the change for the different markets, using a method outlined on the site.
5. Personally weight each metric based on your own view of the importance of that metric.
6. In contrast to SIP data, the CMCRC constructs measures like the NBBO in a way that gives multiple exchanges credit when there is a tie at the best price, providing more representative measures and,
7. Allow one to turn on and off data outliers to reduce the noise in the results
The Results in Summary are:
1. Lit markets appear to be marginally better off after the change with Treatment Group 3 showing the largest positive change. Note that the control group remains steady, as one might hope, suggesting that the changes in the treatment groups are unlikely to be driven by other factors including the Trump election.
2. Maker-taker markets appear to show little change in market quality with the control group also unchanged.
3. Taker-maker markets show a significant improvement in market quality with the control group unchanged.
4. Individual markets show variable results with IEX increasing market quality and Nasdaq and NYSE marginally reducing market quality.
5. Depth at the NBBO is up but so too are effective spreads. So one is paying higher prices but able to secure more volume at these prices.
Ideally we want to hear from institutional investors on whether their overall costs are up or down as a result of the change. The other group we need to hear from are intermediaries who reportedly should have greater returns with which to invest in more research on IPOs.
If you care to go to the CMCRC’s website (www.mqdashboard.com) you will also see a similar analysis for the impact of:
1. the introduction of the Alpha Speed bump in Canada, which aims to address the overall speed of markets
2. the Hong Kong Shanghai/Shenzhen connect project and which effectively creates a bilateral investment channel opening up China’s markets to the world, and
3. the impact of introduction of minimum price improvements rules to trade in the dark in the Australian and Canadian markets, which has recently been published in the Journal of Financial Economics
[ https://www.cmcrc.com/files/docs/ssrn... ]
The results in each of these cases are produced in a little over 10 minutes by accessing our commercial site which provides access to intraday trade, quote and information announcements for every market in the world for the last 10 years.
Users can also access more than 100 metrics such as those in the case studies (or build their own) and then compare and contrast these metrics for individual securities, user defined groups of securities, indices or marketplaces.
Further, the major market design changes for approximately 30 major markets (markets are gradually being added) can also be accessed to enable one to study market design changes in any of these markets.
You can even upload your own private data for your exclusive use as two major world markets have done to date.
We invite your feedback, in particular whether there are other metrics you would like to see and why.