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Strategies & Market Trends : DAYTRADING Fundamentals

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To: Ken Adams who wrote (12977)	5/15/2001 7:14:43 PM
From: LPS5	Read Replies (1) of 18137

Nasdaq To Consider Ditching Pennies 13 May 2001, The Wall Street Letter Officials from the Nasdaq Stock Market are planning to meet next month to evaluate the overall effect of decimalization and consider the possibility of changing the size of the minimum trading increment. A Securities and Exchange Commission order mandating that all stocks trade in penny increments is set to expire on July 6, paving the way for exchanges to establish their own rules for a minimum trading increment. Nasdaq traders complain that trading in pennies has wreaked havoc on liquidity. They say that depth, or the size of an order, at the best bid and offer has tanked ever since the industry abandoned trading in sixteenths in favor of one-cent increments. "We are seeing dramatic declines in size at the inside quote," griped one Nasdaq trader. Lack of depth slows down the execution of large orders because there is a dearth of shares available at the best price in the market. Nasdaq traders aren't alone in this dilemma; Big Board brokers have also said they are having trouble finding liquidity at the best price in the market By SEC mandate, stocks must still be quoted in decimals, but market centers will be allowed to request a rule change with the SEC to change the minimum increment. Nasdaq officials hope to get a full study on the issue to the Securities and Exchange Commission by June 8. The study may recommend a change to the increment, but a spokesman for Nasdaq said it would be premature to say what the recommendation will be, because officials are still examining the data. For its part, the New York Stock Exchange has developed an umbrella group to study the effect of decimal pricing, but Big Board chairman Richard Grasso has said a change in the minimum trading increment is unlikely.

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