The University of Southampton
University of Southampton Institutional Repository

Fractional versus decimal pricing: Evidence from the UK long gilt futures market

Fractional versus decimal pricing: Evidence from the UK long gilt futures market
Fractional versus decimal pricing: Evidence from the UK long gilt futures market
This paper analyses the impact of a move from fractional to decimal pricing in the UK Long Gilt futures market. The reduced tick size following decimalisation leads to an increase in price clustering. The bid-ask spread, measured in ticks, increases following the tick size reduction. However, due to a reduced tick value, the monetary value of the spread declines.
There is a substantial reduction in mean trade size as reduced-depth orders become trades. The mean daily number of transactions increases, which is entirely consistent with increased volume and decreased mean trade size. The finer price grid does not result in higher price volatility.
decimalisation, tick size, price clustering, bid-ask spreads, trade size
0270-7314
419-442
Ap Gwilym, Owain
dbd356d9-b22d-420b-a980-7341f6d52f34
McManus, Ian D.
4e32d128-f390-426b-9bc6-dbef9e8f19bc
Thomas, Stephen
3ebf2346-25f1-4f19-b854-7a7da0cee9ca
Ap Gwilym, Owain
dbd356d9-b22d-420b-a980-7341f6d52f34
McManus, Ian D.
4e32d128-f390-426b-9bc6-dbef9e8f19bc
Thomas, Stephen
3ebf2346-25f1-4f19-b854-7a7da0cee9ca

Ap Gwilym, Owain, McManus, Ian D. and Thomas, Stephen (2005) Fractional versus decimal pricing: Evidence from the UK long gilt futures market. Journal of Futures Markets, 25 (5), 419-442.

Record type: Article

Abstract

This paper analyses the impact of a move from fractional to decimal pricing in the UK Long Gilt futures market. The reduced tick size following decimalisation leads to an increase in price clustering. The bid-ask spread, measured in ticks, increases following the tick size reduction. However, due to a reduced tick value, the monetary value of the spread declines.
There is a substantial reduction in mean trade size as reduced-depth orders become trades. The mean daily number of transactions increases, which is entirely consistent with increased volume and decreased mean trade size. The finer price grid does not result in higher price volatility.

Full text not available from this repository.

More information

Published date: 2005
Keywords: decimalisation, tick size, price clustering, bid-ask spreads, trade size

Identifiers

Local EPrints ID: 36389
URI: https://eprints.soton.ac.uk/id/eprint/36389
ISSN: 0270-7314
PURE UUID: a190606c-dc64-424d-98a4-b537eaa8fcf4

Catalogue record

Date deposited: 22 May 2006
Last modified: 21 Oct 2017 20:22

Export record

Download statistics

Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.

View more statistics

Atom RSS 1.0 RSS 2.0

Contact ePrints Soton: eprints@soton.ac.uk

ePrints Soton supports OAI 2.0 with a base URL of https://eprints.soton.ac.uk/cgi/oai2

This repository has been built using EPrints software, developed at the University of Southampton, but available to everyone to use.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we will assume that you are happy to receive cookies on the University of Southampton website.

×