What was the logic behind forbidding fraction of a penny bidding/offering?

Discussion in 'Order Execution' started by hedron, Sep 15, 2014.

  1. hedron

    hedron

    Is there any real logic to the fact that I as a retail trader cannot bid/offer at a fraction of a penny? It seems that the big institutions can. So, what was the logic behind this rule?

    I am under the impression that this rule is good for at least Nasdaq stocks. I am not certain about NYSE or AMEX.
     
  2. Occam

    Occam

    Most of it is sub-penny "price improvement" on the part of payment-for-order-flow "wholesalers" (who are in fact the largest of the HFT's, such as Knight/GETCO). They pay a fraction of a cent a share to gain exclusive access to retail orders, at the expense of everyone else, including the retail trader who got that $.01 "price improvement" for a 100 share order, but may have had a bad fill or an orders of magnitude better "price improvement" if their order had gone to an actual stock exchange instead.

    http://www.nanex.net/aqck2/3519.html
     
    hedron likes this.
  3. We used to be able to sub penny long ago.
     
    eusdaiki likes this.
  4. convexx

    convexx

    lol loser, you don't have two sub-pennies to rub together.
     
  5. The good ole days of island and brut sub penny shavings :(

    If I recall correctly part of the reason why they banned subpennies, was that it was "confusing" since the prices were small enough to overlap with the maker taker fees...
     
  6. they banned it because it let retail play the same bullshit game the insiders play.

    tell convexx to stop beating his kids.
     
    hedron likes this.
  7. hedron

    hedron

    That's what I was thinking, but I just wanted to know what the lame excuse they used was. Sort of the way they explained why they enacted the PDT rule to "protect" us from losing money in the stock market.
     
  8. not sure if the pdt rule is the same thing. the kind of morons they prevent from churning are no threat to them