Standardization of Trading Board Lot: Effect on Price and Liquidity

  • Nor Elliany Hawa Ibrahim Universiti Utara Malaysia, Malaysia
  • Kamarun Nisham Taufil Mohd Universiti Utara Malaysia, Malaysia
  • Karren Lee-Hwei Khaw University of Malaya, Malaysia

Abstract

In this study we examined the announcement and implementation effect of the standardization of trading board lot event at the Kuala Lumpur Stock Exchange, which saw a reduction of the minimum trading unit from 1000 or 200 units to 100 units. The event was implemented in three stages, which affected all listed firms. Our findings showed that there were positive cumulative abnormal returns surrounding implementation days, indicating positive market reception of the new policy. The Securities Commission of Malaysia stated that the trading activities had increased significantly after implementation of the standard trading board lot. Regardless, this claim has never been verified from an academic perspective, which spurred us to compare its effects on liquidity in the pre- and post-standardization period. Our univariate tests showed that as a whole, the lot size reduction improved bid-ask spread and trading activities of stocks in Malaysia.


 

Published
2018-08-08
How to Cite
IBRAHIM, Nor Elliany Hawa; TAUFIL MOHD, Kamarun Nisham; KHAW, Karren Lee-Hwei. Standardization of Trading Board Lot: Effect on Price and Liquidity. International Journal of Banking and Finance, [S.l.], v. 13, n. 2, p. 95-118, aug. 2018. ISSN 1675-722X. Available at: <http://e-journal.uum.edu.my/index.php/ijbf/article/view/8506>. Date accessed: 10 july 2020. doi: https://doi.org/10.32890/ijbf2017.13.2.8506.