Here are my thoughts, as of right now, on one of the topics you mention:
Message 14507614
I'd really have to see SuperSOES in action before I comment on it's effects on small brokerage firms, institutions, animal husbandry, and the like.
With regard to decimalization, I think that - like with Reg FD - regulators' hearts are in the right place, but the measures ultimately have some detrimental effects on the markets in general.
Pertaining specifically to decimalization (and briefly) it has already been proven that the move from eighths to sixteens decreased average (a) quoted and (b) executed size; now, extrapolated to pennies, the average quoted/executed sizes should get even smaller.
We're all familiar with terms like "liquidity" and "price discovery," but how many of you have ever heard of "crowding"? Basically, it describes a market wherein, due to the negligible size of trading increments, large orders are habitually split into de minimus portions. So, instead of offering 1000 shares at the inside, one might quote 20 levels of 50 shares apiece.
We may not see that in pennies, but I guarantee we'll see it when tenths of pennies become the increment of choice.
I also believe that nickel increments should have been the first decimalization benchmark, with either two- or one-cent increments following. This, of course, for both permitting the dealers to adjust to the new financial and market dynamics of decimals, and also to ensure technological stability with the higher data volumes resulting from more frequent, smaller sizes quoted and executed.
I also agree with the studies that have concluded that volatility will increase as a result of the arrival of both decimalization and SuperSOES, at least as I understand the latter at this point.
Sorry for the short answers, but I've been busy writing an article for a magazine; I'll be freer to examine these and other issues by the time Thanksgiving rolls around.
LPS5 |
