Maybe not narrow the spread but make the liquidity at least seem greater as it will "cluster" in .05 increments. But then again maybe not, lol.
I will tell you who is going to benefits besides the market makers. these crooked wall firms like schwab, etrade and amtd that get payment for order flow when the retail customer offers liquidity - selling on the offer and buying on the bid. they are the ones who pushed this experimental scam. retail customers will hate to give up the .05. a lot of them will miss the market. then they will be scared out of their position at the bottom by hitting the bid. then the market makers willl make enough to snore the powder through the whole weekend.
you didn't read the post from listed guru. 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. <https://www.elitetrader.com/et/thre...-for-tick-size-on-penny-stocks.303176/page-2>
Well I've been looking at a number of these effected stocks since I was trying to trade them before and they definitely traded tighter than $0.05 before, often 1-3 pennies wide. Maybe some were wider, I don't know, but were they all wider than $0.10 consistently when the trades actually occurred? I doubt it. Because now if you can't quote the price you want, you'll have to quote it rounded down to a nickel cheaper. How that is good for liquidity is beyond me.
However, the studies also show that as the day progresses, those 61% that have a wider spread than .05 (this data seems to be taken from the AM or open?), the spread tends to narrow as the day goes on. And, by the end of the day, there are a majority of stocks in the test pilot groups that have a spread narrower than .05. I read this article on it, with hard data. I will try to find the link and post. It does seem sinister in that there are 3 different groups, some of which quote at .05 spread but will allow "price improvement". I am a prop trader, and as one that has traded stocks in the pilot, only the market makers can trade between. My orders sent between the .05 for stocks that are eligible to print between are rejected. but someone is buying and selling there It is just a way for the MM to make more $$$ (not like they were heading to the poor house) and after the 2 years they can see which one benefited them the most and push that outcome. It seems very obvious to anyone with half a brain. It is not a pilot to see which setup benefits the most people, it is to see which setup makes the MM the most money. It will be instituted across the board in 2 years
Agreed and very apparent. If a stock has an average spread of .35, creating .05 ticks does nothing to tighten the spread. If that really was their goal, they only would have done it to stocks whose average spread is over .05. But stocks that had tighter spreads are now wider...in some cases 400% wider!
All I understand from this is that the regulation is completely owned by Wall Street firms now. They can buy any regulation - whatever to grow their profit will be passed in the name of "improving liquidity". I'm scared to think what's next.
Funny we already had this same discussion a while back but the general vibe then was that it was also some Wall Street driven rip-off scheme rather than something beneficial to the public: https://www.elitetrader.com/et/thre...000-smallcap-stocks-starting-may-2016.291356/