| One of the most significant and well-publicized changes in the security trading environment to occur in our country was the move of both Shanghai and Shenzhen exchanges to trading in increments of 0.001 yuan instead of the eighths on May 3,2003.so, there are two different trading system for fund market and A stock market. My paper studies from empirical analysis and theory, and analyzes the tick for fund market and A stock market. Firstly, after compare with the bid-ask spread, quoted depth and volume of the fund, we find that the move to 0.001 yuan reduces the bid-ask spread, quoted depth and the volume. Meanwhile, two kinds of traders have different affection. Because of the remove of the "double-deck profit" model, decreases the costs for smaller trades, but an increase in trading costs for larger trades.Secondly, I compare the statistical results for high-price stocks and low-price stocks and find that differences of the bid-ask spread and quoted depth are significant between high-price stocks and low-price stocks, and no differences for the volume. So I conclude that the reason for these differences is the only trading tick size system for A stock market. This system has different affection for high-price stocks and low-price stocks. For low-price stocks, the tick size is so large that it can appear the "double-deck profit" model and the stock price can be manipulated easily. However, for high-price stocks, the tick size is so small that it can appear "break-in" phenomenon, reduce the quotation size and decrease the liquidity and the aspiration of revealing information.Contrast with the innovations in other foreign mature security markets and combine with the result of the movement to 0.001 yuan for the fund and our security market reality, some suggestions are given: the tick size should be different by the stock price. When the stock price is below 2 yuan, the tick should be 0.005 yuan; when the stock price is between 20 yuan and 2 yuan, the tick should be 0.01... |
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