-
-
The New York Innovation Center bridges the worlds of finance, technology, and innovation and generates insights into high-value central bank-related opportunities.
Do you have a request for information and records? Learn how to submit it.
Learn about the history of the New York Fed and central banking in the United States through articles, speeches, photos and video.
-
-
-
The Governance & Culture Reform hub is designed to foster discussion about corporate governance and the reform of culture and behavior in the financial services industry.
Need to file a report with the New York Fed? Here are all of the forms, instructions and other information related to regulatory and statistical reporting in one spot.
The New York Fed works to protect consumers as well as provides information and resources on how to avoid and report specific scams.
-
-
-
The New York Innovation Center bridges the worlds of finance, technology, and innovation and generates insights into high-value central bank-related opportunities.
The growing role of nonbank financial institutions, or NBFIs, in U.S. financial markets is a transformational trend with implications for monetary policy and financial stability.
The New York Fed offers the Central Banking Seminar and several specialized courses for central bankers and financial supervisors.
-
-
-
We are connecting emerging solutions with funding in three areas—health, household financial stability, and climate—to improve life for underserved communities. Learn more by reading our strategy.
The Economic Inequality & Equitable Growth hub is a collection of research, analysis and convenings to help better understand economic inequality.
The Governance & Culture Reform hub is designed to foster discussion about corporate governance and the reform of culture and behavior in the financial services industry.
-
April 2019 Revised April 2022
JEL classification: G12, G14, G18
Authors: Michael J. Fleming, Giang Nguyen, and Francisco Ruela
This paper studies how a tick size change affects market quality, price discovery, and the competition for liquidity provision by dealers and high-frequency trading firms (HFTs) in the U.S. Treasury market. Employing difference-in-differences regressions around the November 19, 2018 tick size reduction in the two-year Treasury note and a similar change for the two-year futures eight weeks later, we find significantly improved market quality. Moreover, dealers become more competitive in liquidity provision and price improvement, consistent with the hypothesis that HFTs find liquidity provision less profitable in the lower tick size environment. Lastly, we find a significant shift in price discovery toward the cash market, which then reverses when the futures market tick size is reduced, suggesting that the finer pricing grid in the cash market allows traders to act on small information signals that are not profitable to exploit in the coarser pricing grid of the futures market. Our findings suggest that reducing the tick size in tick-constrained and highly liquid markets like the Treasury market is on balance beneficial.
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index. html. Use of TRACE data were subject to review by the Financial Industry Regulatory Authority and the Inter-Agency Working Group for Treasury Market Surveillance (members of which include the Board of Governors of the Federal Reserve System, the Commodity Futures Trading Commission, the Department of the Treasury, the Federal Reserve Bank of New York, and the U.S. Securities and Exchange Commission) prior to circulation. Use of BrokerTec data were subject to review by BrokerTec Americas LLC prior to circulation.
Giang Nguyen
The author declares that she has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index. html. Use of TRACE data were subject to review by the Financial Industry Regulatory Authority and the Inter-Agency Working Group for Treasury Market Surveillance (members of which include the Board of Governors of the Federal Reserve System, the Commodity Futures Trading Commission, the Department of the Treasury, the Federal Reserve Bank of New York, and the U.S. Securities and Exchange Commission) prior to circulation. Use of BrokerTec data were subject to review by BrokerTec Americas LLC prior to circulation.
Francisco Ruela
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index. html. Use of TRACE data were subject to review by the Financial Industry Regulatory Authority and the Inter-Agency Working Group for Treasury Market Surveillance (members of which include the Board of Governors of the Federal Reserve System, the Commodity Futures Trading Commission, the Department of the Treasury, the Federal Reserve Bank of New York, and the U.S. Securities and Exchange Commission) prior to circulation. Use of BrokerTec data were subject to review by BrokerTec Americas LLC prior to circulation.
