NZX Joins the Race to Minimise Tick Size
Abstract
In 2011, the New Zealand Exchange (NZX) reduced the minimum tick size from $0.01 to $0.005
for seventeen dual-listed and property stocks, with the stated objective of boosting NZX liquidity.
After controlling for firms matched on similar liquidity characteristics, both spread and depth
significantly decline, and there is some evidence of higher turnover. However, smaller firms do
not enjoy the same liquidity benefits as larger firms. For example, smaller firms and those with
greater illiquidity prior to the tick change, experience deterioration in turnover after the change.
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