Date of Award
Master of Science (MS)
Economics and Finance
I examine the effects of a change in the minimum quotation size on liquidity and volatility in the modern over-the-counter (OTC) markets. On November 12, 2012, the Financial Industry Regulatory Agency (FINRA) introduced a pilot program to adjust the minimum quote sizes for securities transactions in the OTC markets. I find that an increase in the minimum quote size decreases OTC market quality as spreads widen and volatility increases. In contrast, I find that a decrease in the minimum quote size improves OTC market quality, but the results are sensitive to the price of the security. These results offer important insights to regulators, exchange officials, and market participants in the OTC marketplace.
Thompson, Kemerey, "Minimum Quotation Size and Market Quality: Evidence from the Modern OTC Markets" (2019). All Graduate Plan B and other Reports. 1367.
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