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FR - AMF study on impact of harmonised tick size regime

10/05/2019

On 15 February 2019, the Autorité des Marchés Financiers (AMF) released the results of a new study on the impact of the European harmonised tick size regime stemming from the new Markets in Financial Instruments Directive (MiFID II).

The study spans a period of ten months between the effective date of MiFID II and the new European Tick Size Regime, i.e. August 2017 to May 2018, and includes higher volatility cycles. As a reminder, the tick size is the minimum fluctuation possible between two directly successive prices on the market. Overall, an extremely low tick will generate immaterial but continuous price fluctuations that will lead to increased "noise" in the trading book and undermine the price-setting mechanism. In contrast, an extremely high tick may erode liquidity. To avoid these drawbacks, the European Securities and Markets Authority (ESMA) had determined the tick sizes based on the profile (transactions per day) and the price of each security. The new AMF study demonstrated that the new tick size regime had the desired impact on market quality. There are numerous indicators of increased depth, reduced noise and greater stability of the trading book.

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