Tick Size Change and Market Liquidation in Indonesia Stock Exchange
Wisudanto Mas Soeroto, Tika Widiastuti, Lily Cania

Universitas Airlangga

Abstract

ABSTRACT: One thing that Indonesia Stock Exchange (IDX) do in other to compete between a member of World Federation of Exchange (WFE) is changing the tick size. Become a five tick size in price group hopes to increase the liquidity. This research using bid-ask spread, and depth estimated using stock volume in closing price before and after new tick size policy applied in each price group. We use the non parametric-test to examine the mean difference in two related samples. Increase in the tick size leads to increases in the spread. Bid depth and ask depth also increased, however, ask depth did not show any difference. Therefore, to eliminate the ambiguity this study using depth to relative spread ratio that resulted in the more broad spread. IDX need to consider a tick size that can increase liquidity in each stock price group, becomes more attractive for investors.

Keywords: bid-ask spread, market depth, tick size, market liquidity

Topic: Financial Management and Accounting