Publication Details

Gerace, D., Smark, C. & Freestone, T. (2012). Impact of reduced tick sizes on the Hong Kong stock exchange. Journal of New Business Ideas and Trends, 10 (2), 54-71.


Purpose - The purpose of this study is to analyze the effect of the 2005 reduction in minimum tick size in the Hong Kong Stock Exchange (HKEx). The tick size is the smallest amount by which the price of any exchange traded instrument can move.

Design/methodology/approach - This study involved univariate and multivariate (regression) analysis to observe the effect of the 2005 HKEx reduction in tick size on the volume, spread and depth of the market in affected shares. Findings - The shares affected by the reduction in tick size (those valued at over HK$30) showed a significant decline in their quoted spreads, percentage spreads and quoted depth.

Originality/value - This finding supports the case that a policy of reduced tick sizes may have the effect of improving market liquidity and contributes to the literature related to minimum price increments in financial markets.

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