What does this research mean for the field?

Increasing the minimum tick size significantly reduces abnormal price clustering in small-cap stocks, a phenomenon that reverses upon the policy's conclusion and aligns with attention-based rather than liquidity-based explanations. Novelty: ClaimNovelty.CONFIRMATORY. Consensus alignment: ConsensusAlignment.NEUTRAL.

What question did this study set out to answer?

To evaluate the causal effect of widening minimum tick sizes from $0.01 to $0.05 on price clustering anomalies in small-cap equities.

August 27, 2026Financial Management

The Effect of Tick Size on Price Clustering: Evidence From the 2016 US Tick Size Pilot Program

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Authors

BBBenjamin M. BlauUtah State University JBJake BreezeUtah State University TGTodd G. GriffithUtah State University

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Implication

Quasi-experimental study reveals reduced abnormal price clustering in small-cap stocks under widened tick sizes, indicating investor attention drives quotation patterns over liquidity.

Key Points

To evaluate the causal effect of widening minimum tick sizes from $0.01 to $0.05 on price clustering anomalies in small-cap equities.
Evaluated the SEC's 2016 Tick Size Pilot Program (TSPP) utilizing a treatment and control design across small-cap stocks during implementation and post-program conclusion.
Conducted cross-sectional analyses across subgroups stratified by baseline tick constraints, market capitalization, and analyst coverage.
Abnormal price clustering significantly decreased for treatment stocks relative to controls during the TSPP, but rebounded to control levels once the pilot concluded.
Reductions in price clustering were most pronounced among tick-unconstrained stocks with wide pre-pilot spreads, smaller market capitalization, and limited analyst coverage, consistent with an attention-based mechanism.

Cite This Study

Blau et al. (2026) studied this question.

synapsesocial.com/papers/6a8fea3310c91c1e92622537 https://doi.org/10.1111/fima.70062

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Implication

Quasi-experimental study reveals reduced abnormal price clustering in small-cap stocks under widened tick sizes, indicating investor attention drives quotation patterns over liquidity.

The Effect of Tick Size on Price Clustering: Evidence From the 2016 US Tick Size Pilot Program

Discussion

Member takes

Implication

Key Points

Cite This Study

The Effect of Tick Size on Price Clustering: Evidence From the 2016 US Tick Size Pilot Program

Discussion

Member takes

Implication

Key Points

Cite This Study

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