What Happened to the Effective Spread on Trades When the SEC

question 37

Multiple Choice

What happened to the effective spread on trades when the SEC allowed the minimum tick size to move from one-eighth of a dollar to one-sixteenth of a dollar in 1997 and from one-sixteenth of a dollar to one cent in 2001?

• A) The effective spread increased in 1997 but decreased in 2001.
• B) The effective spread increased in both cases.
• C) The effective spread decreased in 1997 but increased in 2001.
• D) The effective spread decreased in both cases.

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