Commentary

Elaine Wah

Modern Markets, Modern Metrics - A Blog By IEX

In this blog by IEX's Elaine Wah, the newest public exchange looks to refute public claims that the metrics it uses are designed to inflate its own volume numbers and mislead people.

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In his first public speech, SEC Chair Jay Clayton deviated from his prepared remarks and offered his own "off the cuff" comments on market issues. Do you like this change of pace?




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July 31, 2003

The Academic Research on Both Sides

By Editorial Staff

While bid-ask spreads have narrowed under decimal pricing, some academic studies note the detrimental effect decimalization has had on overall trading costs, execution quality and liquidity. Other studies, however, show the market adjusting positively.

"Decimal Trading and Market Impact" by Sugato Chakravarty, Stephen P. Harris and Robert A. Wood, 2001.

Conclusion: Mixed verdict on market liquidity because of lower spreads and less depth.

"Has Decimalization Hurt Institutional Investors? An Investigation into Trading Costs and Order Routing Practices of Buyside Institutions" by Sugato Chakravarty, Venkatesh Panchapagesan and Robert A. Wood, 2003.

Conclusion: Liquidity is not more costly, although traders are trading in smaller size.

"Clustering in U.S. Stock Prices After Decimalization" by David Ikenberry and James P. Weston, 2003

Conclusion: Traders gravitate toward penny and nickel increments anyway, so shifting to a larger tick wouldn't change much.