Nasdaq Change to Limit Orders ?

[TheBramble]

Back to the thread - does anyone think that this new shaving rule will lead to wider spreads - thus more intraday volatility? Could that be a good thing?

Will it lead to wider spreads? I don't think so. The majority of traders using sub-penny were never trading at the inside market.

So the inside bid/ask (the spread) will not be much affected.

However, the depth may well be. There should now be more traders (and shares) at each full penny level than previously. So less individual trading levels with more support at each. I'm thinking this through as I'm responding - does this make sense?

Although I don't think wider spreads will result (as posited above), why would wider spreads lead to greater volatility? I would have thought the reverse was true.

 

[BBB]

Wider spreads could lead to higher volatility as more waiting orders will be touched resulting in greater price discovery. Thats one reason why markets with low liquidity can be prone to huge swings - because of criminal spreads made by the insiders (although this could be a bit chicken & egg).


You're right Bramble - I don't think the inside will be affected much either - but I could be wrong! Interested in others views thats all.

 

[TheBramble]

Just noticed on the demo DAE version, you still get filled at sub-penny points if you go at market.

You can also still place limit orders with sub-penny amounts.

Is this likely to be just because it's a demo version?

 

[BBB]

Probably. I demoed a Refco product the other day for futures. They had contracts that are no longer traded! (French Franc, D Mark, etc) How poor is that! And I thought they were a quality outfit.