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Communiqués de l'AMF
The AMF conducts a more detailed analysis of the effects of the European harmonised tick size regime
15 February 2019

The AMF conducts a more detailed analysis of the effects of the European harmonised tick size regime

After an initial study carried out just after the implementation of the harmonised tick size regime in Europe on 3 January 2018, further to the new Markets in Financial Instruments framework (MiFID 2), the Autorité des Marchés Financiers has published an analysis carried out over a longer period. It confirms the positive effects that were initially observed.

This new study covers a ten-month period around the date on which MiFID 2 and the new European tick size regime entered into force, from August 2017 to May 2018, and includes phases of greater volatility. The scope of analysis, covering more than 500 French securities (CAC40, other securities with capitalisation above or close to €1 billion and shares in small and medium-sized enterprises), remains unchanged.

The tick size is defined as the minimum permitted difference between two directly consecutive prices on the market. If the tick is set at 5 euro cents, for example, it means that after a €10 quotation, the first possible higher bid will be €10.05. Generally speaking, if the tick size is too small, this will lead to insignificant and incessant price fluctuations, while generating increased noise in the order book and impairing the price formation mechanism. Conversely, an excessively large tick size could lead to reduced liquidity. To avoid these pitfalls, the European Securities and Markets Authority (ESMA) has defined tick sizes according to the liquidity profile of each security (number of transactions per day) and its price.

The AMF's new study, spanning a longer observation period, demonstrates that the new tick size regime has had the desired impact on the quality of the market. Several indicators point towards greater depth, reduced noise and more stable order books (increase in the median lifespan of orders, lower frequency of modification of the best prices, lower order-to-trade ratio), at constant or even higher volumes for SMEs. This has improved the clarity of the price formation process on the market.

This new edition was also an opportunity to evaluate the cost of a transaction per category of market player: it has dropped slightly for transactions carried out on behalf of clients and appears to have risen slightly for high-frequency-trading operators.


About the AMF
The AMF is an independent public authority responsible for ensuring that savings invested in financial products are protected and that investors are provided with adequate information. The AMF also supervises the orderly operations of markets. Visit our website https://www.amf-france.org

Press contact:
AMF Communication Directorate - Christèle Fradin - Tel: +33 (0)1 5345 6029 or +33 (0)1 5345 6028

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