Intraday variation in trading costs: Evidence from the TSPP

Abstract

We examine changes in the intraday pattern of trading costs between pilot and control stocks during the US Securities and Exchange Commission tick size pilot program (TSPP). We find that intraday trading costs are relatively unchanged between pilot and control stocks in pre- and post-TSPP periods. We find that differences in trading costs between pilot and control stocks during the TSPP are lower in the morning and greater toward the close. We also find that intraday differences in quoted depth between pilot and control stocks during the TSPP is lower at the beginning of the day, increases during the day, and falls toward the close of trading.