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arXiv · 1602.04950

Deviations in expected price impact for small transaction volumes under fee restructuring

Michael Harvey·Dieter Hendricks·Tim Gebbie·Diane Wilcox
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Abstract

We report on the occurrence of an anomaly in the price impacts of small transaction volumes following a change in the fee structure of an electronic market. We first review evidence for the existence of a master curve for price impact on the Johannesburg Stock Exchange (JSE). On attempting to re-estimate a master curve after fee reductions, it is found that the price impact corresponding to smaller volume trades is greater than expected relative to prior estimates for a range of listed stocks. We show that a master curve for price impact can be found following rescaling by an appropriate liquidity proxy, providing a means for practitioners to approximate price impact curves without onerous processing of tick data.

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Michael Harvey, Dieter Hendricks, Tim Gebbie, Diane Wilcox. 2016-02-16. Deviations in expected price impact for small transaction volumes under fee restructuring. https://doi.org/10.1016/j.physa.2016.11.042

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