Market fairness and efficiency: Evidence from the Tokyo Stock Exchange

B-Tier
Journal: Journal of Banking & Finance
Year: 2022
Volume: 134
Issue: C

Authors (3)

Kemme, David M. (University of Memphis) McInish, Thomas H. (not in RePEc) Zhang, Jiang (not in RePEc)

Score contribution per author:

0.670 = (α=2.01 / 3 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

In 2015 the Tokyo Stock Exchange (TSE) implemented Arrowhead Renewal improvements (ARI) that reduced latency from about one millisecond to less than 0.5 ms. Simultaneously, the ARI introduced new risk management functions to improve market fairness by reducing manipulative trading strategies. We find a dramatic improvement in market fairness as proxied by marking-the-close incidents, which declined by 61.19%. We find a much smaller improvement in market efficiency. Specifically, there was a reduction in the effective (quoted) spread of 6.45% (5.79%). The most dramatic improvement in market quality (fairness and efficiency) was for low-tick-size and high-market-capitalization stocks.

Technical Details

RePEc Handle
repec:eee:jbfina:v:134:y:2022:i:c:s0378426621002612
Journal Field
Finance
Author Count
3
Added to Database
2026-01-25