Changes in the options contract size and arbitrage opportunities

We examine the impacts of changes to the options multiplier on market efficiency by analyzing their effects on arbitrage proxies based on the performance of options spread strategies. Despite the intentions of the reforms, both decisions to raise and reduce the multiplier significantly increase the frequency and probability of arbitrage opportunities. Whereas the increment in the multiplier also deteriorates market efficiency by increasing the duration and average size of the arbitrage opportunities in a day, the decrement does not affect these proxies. Our results overall provide evidence that reforms to the options multiplier do not enhance market efficiency and suggest that retail investors are not homogeneously noisy.