摘要：This paper examine the influence of tick size reduction on the market liquidity using trading friction in Indonesian Stock Exchange an emerging order driven market. The empirical results show that variable in determining the difference in performance of IDX stocks following the tick size reduction is the price of the stock. Low priced stocks experience larger declines in trading friction than high priced stocks. Tick size reduction has a significant impact on the real friction (% TS1 and% TS2) compared to the total friction (% S &% ES). The difference test of the average change in proportional quoted half spread (%S) and proportional effective half spread (%ES) as the impact of tick size reduction can’t prove there is the influence of tick size reduction on market liquidity, because the parameter isn't significant. While the difference test of the average change in proportional first traded half spread (% TS1) and proportional second traded half spread (% TS2) can prove the effect of the tick size reduction to the decline in trading friction.
