Moscow exchange changes the tick size according to the new methodology
To increase the effectiveness of equity market microstructure and to meet the world’s best practices, MOEX establishes the new tick size and Decimals parameter for the following stocks according to the new methodology starting 1st August 2018 in the following trading modes:
- Main trading mode Т+ ("Т+2" order book)
- Odd lots trading mode
- Dark pool trading mode
- Equities D — Main trading mode Т+
- Negotiated trading mode(NTM)
- Equities D (NTM) trading mode
- NTM with CCP trading mode
The new methodology ensures that European and Russian regulations are in alignment in this area. This reduces the possible regulatory issues that may arise for European entities when operating in the Russian market due to this particular MiFID II requirement. At the same time by adopting a recognized standard trading on Moscow Exchange will be easier and better. The new approach to setting the tick size was approved by the MOEX Securities Market committee.
The new methodology includes:
- The tick size multiple of 2. Starting 1 August 2018 the tick size equals (1,2,5)*10N, where N – integer;
- Increasing the number of price ranges to 25, and the ranges of liquidity - up to 7;
- For each liquidity range a recommended range price tick sizes in the spread is established;
- The maximum allowed relative tick size – 1%
To establish the correct tick size the price and liquidity of a stock is considered. Tick size optimization encourages investors to place orders in the Central Limit Order book. Improving the quality of the Order Book facilitates the use of HFT technologies in a wider range of securities and increases liquidity in the stock market.
The tick size review was established in 2Q 2015 and takes place quarterly.