Abstract
The regulated tick size at a securities exchange puts a lower bound on the bid/ask spread. We use cross-sectional and cross-daily data from the Stockholm Stock Exchange to assess if this lower bound is economically important and if it has any direct effect on market depth and traded volume. We find a) strong support that the tick size is positively related to the bid/ask spread (market width) and b) support that it is positively correlated to market depth and c) some support that it is negatively related to traded volume. We identify different groups of agents to whom a lower tick size would be beneficial and to whom it would be detrimental.