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Effects of MiFID II on stock price formation

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  • Mike Derksen
  • Bas Kleijn
  • Robin de Vilder

Abstract

This paper examines effects of MiFID II on European stock markets. We study the effects of the new tick size regime, both intraday and in the closing auction. An increase (decrease) in tick size is associated with a decrease (increase) in intraday liquidity, but a more (less) stable market. In the closing auction an increase in tick size has a positive effect on liquidity. Moreover, we report a positive relationship between tick size and transacted volume, in particular in the closing auction. Finally, closing auction volumes increased heavily since MiFID II and price formation in closing auctions became more efficient.

Suggested Citation

  • Mike Derksen & Bas Kleijn & Robin de Vilder, 2020. "Effects of MiFID II on stock price formation," Papers 2003.10353, arXiv.org, revised Aug 2020.
    • Handle: RePEc:arx:papers:2003.10353
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    References listed on IDEAS

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    Cited by:

    1. Derksen, M. & Kleijn, B. & de Vilder, R., 2022. "Heavy tailed distributions in closing auctions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 593(C).

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