Tick size change on the Stock Exchange of Thailand

Abstract

This paper explores the impact of exogenous tick size reduction on bid-ask spreads, depths, and trading volume on the Stock Exchange of Thailand (SET). On November 5, 2001, the SET implemented tick size reduction on stocks below THB 25. Even though trading on the Thai Exchange is largely dominated by retail investors, the tick reduction produces similar empirical results found in markets where institutional investors are more dominant. Tick reduction on the SET is associated with declines in spreads, quoted and accumulated market depths. The study finds no significant change in trading volume of the affected stock group. *Corresponding author: School of Business, Thammasat University, Bangkok 10200, Tel: +662-225-2107 Email: pantisa@tu.ac.th Tick Size Change on the Stock Exchange of Thailand January 31, 2008 AbstractThis paper explores the impact of exogenous tick size reduction on bid-ask spreads, depths, and trading volume on the Stock Exchange of Thailand (SET). On November 5, 2001, the SET implemented tick size reduction on stocks below THB 25. Even though trading on the Thai Exchange is largely dominated by retail investors, the tick reduction produces similar empirical results found in markets where institutional investors are more dominant. Tick reduction on the SET is associated with declines in spreads, quoted and accumulated market depths. The study finds no significant change in trading volume of the affected stock group.

Tick size, market structure, and market quality

“…In addition, Seppi (1997) shows that the limit order book's cumulative depth decreases as the tick size decreases. Indeed, prior research finds smaller depths after tick size reductions on various exchanges (Bacidore 1997;Porter and Weaver 1997;Goldstein and Kavajecz 2000;Pavabutr and Prangwattananon 2009).…”

“…Ahn et al (1996Ahn et al ( , 1998, Bessembinder (1999Bessembinder ( , 2003, Van Ness et al (2000), Chung et al (2004a, b), and Pavabutr and Prangwattananon (2009) examine changes in market quality around a market-wide change in tick size. These studies show that a reduction in tick size generally leads to smaller depths and narrower spreads.…”

The Factors Affecting Financial Reporting Reliability: An Empirical Research of Public Listed Companies in Thailand

“…Sample of this research is the companies in the SET. The main reason to choose them for investigation is that they are large firms with hierarchical structure, a lot of authorized capital, and process standardization (Pavabutr & Prangwattananon, 2009). Accounting controllers or chief accountant officers are chosen as key participants because they have a direct effect on financial reporting practices in each corporation.…”

Analysis of the Factors Affecting Successful Accounting Information of Listed Companies in the Stock Exchange of Thailand

“…Population and sample of this research is the companies in the SET. The main reason to choose them for investigation is that they are large firms with hierarchical structure, centralized decision-making, plenty of authorized capital, and process standardization (Pavabutr & Prangwattananon, 2009). Thus, listed companies in Thailand have been chosen as the sample of this research.…”