Tick size change at the Moscow Exchange equity market as of 1st of December
From 1 December, Moscow Exchange is setting price ticks for ten most liquid equities, mutual funds, mortgage-backed participation certificates and ETFs for the following trading modes:
- T+2 Central order book;
- Odd lots;
- Block trades;
- Central order book for equities D;
- Settlement of futures and options;
- Bilateral OTC trade;
- Bilateral OTC trade in Equities D;
- Bilateral OTC trade with CCP.
To determine the tick size, the security liquidity is taken into account in addition to its price. This allows rationalizing the order book structure, boosting liquidity at best bids and best asks and facilitating investors to enter limit orders in the exchange order book. Improvement of the order book quality helps to improve liquidity and attract new brokers to trade on the exchange.
Moscow Exchange implements the approach for setting the price ticks in two stages as recommended by the Equity & Bond Market Committee:
At the first stage, from 1 October 2014, the price tick was changed for 332 equities, and DRs representing equities. This allowed the following achievements by the end of October:
- Share of trades in equities for which the new approach was used increased to 20% (16% in September);
- Optimization of the price tick values allowed rationalizing the order book structure, increasing the average size of best bid/ask by 35% (for the top 10 securities with the price tick changed), making the number of ticks in the spread much more convenient for brokers. At the same time, spreads in the most liquid securities did not increase, and spreads in less liquid securities reduced sharply.
At the second stage, from 1 December 2014, the new procedure for setting the price tick will cover all equities including the most liquid ones, mutual funds, mortgage-backed participation certificates and ETFs.
We expect that the price ticks will be reviewed quarterly from 2Q 2015.
The price tick method employed by Moscow Exchange was adopted by the MICEX Stock Exchange Equity Market Committee on 27 June 2014.
For further information, please contact the Public Relations Department at (495) 363-3232.