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

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  • Michael Harvey
  • Dieter Hendricks
  • Tim Gebbie
  • Diane Wilcox

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. "Deviations in expected price impact for small transaction volumes under fee restructuring," Papers 1602.04950, arXiv.org, revised Nov 2016.
    • Handle: RePEc:arx:papers:1602.04950
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    Cited by:

    1. Ivan Jericevich & Patrick Chang & Tim Gebbie, 2020. "Comparing the market microstructure between two South African exchanges," Papers 2011.04367, arXiv.org.
    2. Dicks, Matthew & Paskaramoorthy, Andrew & Gebbie, Tim, 2024. "A simple learning agent interacting with an agent-based market model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 633(C).
    3. Roger Martins & Dieter Hendricks, 2016. "The statistical significance of multivariate Hawkes processes fitted to limit order book data," Papers 1604.01824, arXiv.org, revised Apr 2016.
    4. Ivan Jericevich & Patrick Chang & Tim Gebbie, 2021. "Simulation and estimation of an agent-based market-model with a matching engine," Papers 2108.07806, arXiv.org, revised Aug 2021.

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