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QOTW (Dec 13th 2016): How have spreads and top of book depth changed since the tick pilot started?

How have spreads and top of book depth changed since the tick pilot started?

 

Chart 1: Percent change in spreads and top of book depth across pre-pilot spread groups

 

Chart 2:  Weekly trends in top of book depth (September 4 – December 2)

 

Chart 3:  Weekly trends in spread (September 4 – December 2)

  • The much anticipated tick size pilot program is in progress and we will continue to provide observed statistical updates from time to time. This week’s topic provides a summary on spread and top of book depth changes since the pilot began for various pre-pilot spread groups. We also present an analysis of weekly trends for September 4 – December 2.
  • We observe increases in average spreads and top of book depth in all groups. Securities with average pre-pilot spreads less than 5 cps have realized the largest increases. These spread increases are around 2x and top of book depth increases are at least 5.5x.
  • We observe the weekly top of book depth and spread averages in all groups rising since the roll out. Chart 2 highlights that the most dramatic increases in average top of book depth are in pilot groups 2 and 3. It will be interesting to see if these trends continue into 2017.
  • In chart 3, we observe that pilot groups 1 and 2 have displayed nearly identical average weekly spread patterns since September 4. We also observe pilot group 3 average weekly spreads rising during the week of October 9, prior to any group 3 securities being rolled out.

Pre-pilot spreads were calculated for each security by averaging the 5-minute time weighted spread for the period between January 1, 2016 and the effective tick pilot date. The pre-pilot spread buckets reflect these calculated averages.

The annotations in Charts 2 and 3 reflect the percentage of each group’s total securities rolled out during that week. The dates in the charts reflect the first trading date of the week.

Refer to Equity Related Analytics for information available on Equity Related Analytics.

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