The expectation and the reason it's a pilot is that in these names liquidity has a price. In a world of pennies you might see three MMs a showing a hundred or two hundred shares and $.01 wide. Go try to buy 500 or a 1000 shares and you discover the real liquidity is at a price away from the $.01 wise quote. If liquidity and volume in these names doesn't benefit over the period of the pilot then it's a failure and they go back. The "hope" is more liquidity in these names will generate more interest and liquidity begets liquidity. If it works expect to see it in less liquid products across the board. BTW the SEC had this out for comment for the better part of this year. In the future if you want to gripe about a proposal - write a comment back to the SEC. The working groups actually go through all of the comments. I know none of the exchanges are excited about it as the data collection costs for the pilot are going to add up to mega bucks. Price is the equilibrium of liquidity.
To be honest like I said it doesn't really effect my style of trading. Was something I hadn't heard of was just starting a topic over it. I applaud for actually trying something though. It is a good way to get the market makers in there since it may be worth their time and funds now. I'm from Canada and you want to see a sad market just check out the venture exchange lol. Don't even think IIROC has any idea how to tackle that mess. So much garbage diluting a smal market to begin with.
It's how it all starts. "It doesn't affect me" until one day it does and then it's usually too late. This has been discussed a long time before, it's important to keep an eye on regulatory news.
Gee, if you make stocks $1 wide, I bet there would be plenty of liquidity offered on both sides. This is no different, and will find what the market makers wanted to be found - more liquidity (for those not caring about liquidity at a good price) and more profits for them. In the meanwhile, the public suffers.
You remember how badly the Market Making firms got slammed when we went to full on Decimalization? Knight-Trimark (Citadel-Knight Group) complained and complained until they blew themselves up forgetting to shut down the correct order server. Thank God for Citadel to rescue and take their firm over! We both smell a Rat on this Pilot Program, watch and see how people get taken again!
If will be very interesting to see how this pilot unfolds. I would say the vast majority of these pilot stocks already trade with a spread bigger than .05 on average so maybe this will help consolidate that liquidity so to speak. Also I think on Monday only a handful of stocks are going to go live under the pilot and then the rest getting each Monday through the end of October. I foresee a lot of rejected orders in the beginning as people forget to enter their orders in .05 increments. Fun times, lol. -Guru
Here are a couple of decent read on the subject: http://www.convergex.com/ticksizepilot/ http://marketsmedia.com/brokers-smell-trouble-attempt-spur-smallcap-volume/ -Guru