ABSTRACT
One action taken by the Indonesia Stock Exchange (IDX) in order to compete with members of the World Federation of Exchange (WFE) is changing the tick size. It is hoped that an increase to a five tick size in the price group will increase liquidity. This research used the bid–ask spread and depth was estimated using stock volume in closing price before and after a new tick size policy was applied in each price group. We used the nonparametric test to examine the mean difference in two related samples. An increase in the tick size leads to increases in the spread. Bid depth and ask depth also increased; however, ask depth did not show any difference. Therefore, to eliminate the ambiguity this study used the depth to relative spread ratio, which resulted in a broader spread. The IDX needs to consider a tick size that can increase liquidity in each stock price group, which therefore becomes more attractive for investors.
