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Non-Tech : Meet Gene, a NASDAQ Market Maker -- Ignore unavailable to you. Want to Upgrade?

To: SteveDavis who wrote (596)	8/17/2000 10:43:39 PM
From: gene_the_mm	Respond to of 1426

GOOD QUESTION STEVE... It was my understanding that the INITIAL move to decimals was going to be from 1/16 increments to .05 increments for the first few years. This would increase the number of price levels in stocks above $10 on the NAZ from 16 to 20. I might be completely wrong but I was under the impression it was NOT going to go right to .01 increments. My opinion is that at .05 increments you wont see too much of a difference except that stocks would probably trade HIGHER volume because of the slightly more reliable liquidity (though not necessarily true for thinner stocks). In the thin float deals, the .01 increments are going to create the illusion of more liquidity when the stock is actively trading (many people will be 'chiseling' to get ahead of each other), but when these stocks are inactive they will be just as difficult as they are now. If profits are waning in the thinner deals due to tighter spreads then these stocks will probably become more difficult to trade because many MM's will drop them due to the tremendous risk to reward ratio. Profits should be unaffected because as spreads narrow volume should increase due to (this has been the general theory all along and so far it has played out). Most of the above is just a guess and I am probably dead wrong. I am confident, however, that no matter what they do it should only make the trading environment BETTER. What sometimes looks like doom and gloom ends up making the environment better for everybody. This was the case with the advent of order transparency, the ECN's, daytrading and now decimalization and SUPERSOES. Thanks for the great question, -- Gene