Oslo Børs: Harmonised tick sizes for European marketplaces

Oslo Børs: Harmonised tick sizes for European marketplaces

24/08/09

Oslo Børs will introduce new tick sizes for the 25 shares that make up the OBX index with effect from Monday 31 August 2009. As previously announced, this is the result of the initiative taken by the Federation of European Securities Exchanges (FESE) to simplify and harmonise tick sizes in European markets. Other stock exchanges and multilateral trading facilities (MTFs) have also committed themselves to use harmonised tick size tables.

Tick size refers to the minimum amount by which the price of a share is allowed to move up or down, and is thus the minimum difference between bid and offer prices in the order book.

Oslo Børs elected in July 2009 to reduce the tick size for all OBX shares to NOK 0.01 as a result of reductions in tick sizes that some MTFs had already announced even though the FESE was still working on harmonising tick sizes, cf. Oslo Børs press release of 29 June.

Competition between marketplaces to offer the lowest tick size can have adverse consequences for the market, particularly if the difference between bid and offer prices in some shares becomes so small that the advantage of placing large orders becomes no more than marginal. This can lead to lower activity, which has an adverse affect on marketplace liquidity.

The risk of such adverse consequences is a major reason for the decision by the FESE members, the broking community, and the MTFs Chi-x, BATS Europe, Nasdaq OMX Europe and Turquoise, to sign up to a harmonised and simplified tick size regime. Harmonisation in this area is beneficial for all market participants, including investors.

In practical terms, the exchanges have agreed to use one of four tick size tables. The MTFs have in turn agreed to apply the tick size table adopted by the listing venue for the underlying shares. The London Stock Exchange and Oslo Børs entered into a strategic partnership agreement earlier this year to co-operate on technical issues and business development, and have therefore adopted the same tick size table (see below).

  

Share price

 

 

Lower limit

Upper limit

Tick size

Tick as % of price

 

 

 

 

Max.

Min.

Band 1

-

0.4999

0.0001

-

0.02%

Band 2

0.5

0.9995

0.0005

0.10%

0.05%

Band 3

1

4.9990

0.001

0.10%

0.02%

Band 4

5

9.995

0.005

0.10%

0.05%

Band 5

10

49.990

0.01

0.10%

0.02%

Band 6

50

99.95

0.05

0.10%

0.05%

Band 7

100

499.90

0.1

0.10%

0.02%

Band 8

500

999.50

0.5

0.10%

0.05%

Band 9

1,000

4,999.00

1

0.10%

0.02%

Band 10

5,000

9,995.00

5

0.10%

0.05%

Band n…

10,000

etc. etc

10

0.10%

-

 Tick sizes will not change for shares (including accompanying subscription rights) that are not included in the OBX index, and tick sizes will also continue unchanged for equity certificates and warrants. The unchanged tick size table for these securities is as follows:

  

Share price

 

 

Lower limit

Upper limit

Tick size

Band 1

-

9.99

0.01

Band 2

10.00

14.95

0.05

Band 3

15.00

49.90

0.10

Band 4

50.00

99.75

0.25

Band 5

100.00

249.50

0.50

Band 6

250.00

-

1.00

 Tick Sizes for Exchange Traded Funds (ETFs) will also continue unchanged:

  

Share price

 

 

Lower limit

Upper limit

Tick size

Band 1

0,01

4,99

0,01

Band 2

5

99,95

0,05

Band 3

100

249,90

0,10

Band 4

250

499,75

0,25

Band 5

500

4999,50

0,50

Band 6

5000

-

1,00