Sub-pennying cost investors $1 Billion last year

Discussion in 'Order Execution' started by tripledtrader, Jul 25, 2012.

  1. Hi Tripledtrader,

    The article you posted is very interesting and I encounter sub-penny executions all the time. I get extremely annoyed and frustrated when someone front-runs me by 0.0001. What I don't understand is how is that possible and if certain market participants can do it why is it not allowed for everybody.

    Do you know what order types they use? Do you know which broker-dealers/prop firms or who the heck is doing it? Any info would be greatly appreciated.

    Kind Regards,
  2. Occam


    It's largely internalization and/or payment-for-order-flow deals between retail brokers and wholesalers -- a hidden tax on everyone that isn't either a broker/dealer or one of a handful of large wholesaler firms (such as Knight Capital):
  3. vicirek


    How much it would cost investors if spread was still starting at 1/16 1/8 and so on?
  4. That is the most unintelligent article written. It is assuming that "investors are at the bid". Investors are NOT at the bid!!! My dad who just bought 5,000 shares of GE didn't place 65 cancel / replaces to find out he was sub pennied, he placed a market order.

    This article should say sub pennying hurts the average day trader who is trying to do this for a living as their risk of quoting the stock isn't being rewarded because of sub pennying

    Or the article should say that investors are losing because spreads are wider due to less incentive for liquidity providers to make a market... While this seems to make sense... I think the article should really explore this theory to make its point.
  5. zdreg


    are you one of those traders who could not adjust to smaller spreads and is wishing for the "good ole days " of fractions instead of decimals or were u one who recognized that specialists and marketmakers were ripping everyone off with fractions.
  6. vicirek


    Do you know the answer how much 1/16 spread would cost investors as compared to 0.00001c subpennying or you wasting my time?
  7. Does anyone know if tiny violins are also priced in sub-penny increments? :)
  8. 6,249 billion, give or take, assuming like-for-like spread paying monkeys :eek:
  9. vicirek


    I remember that retail could submit orders in 1/16 increments and the subpennying was in 1/32 and maybe later in 1/64.

    Anyway it was fun to trade then when feed was decimal (float or double in computer language) and I had to convert it to fractions to submit order. Good old days. And guys are crying about subpennying now.

    This brings the point that decimalization and no uptick rule was driven by automation of trading and risk management combined with decentralization of exchanges. In such case uptick rule would be difficult to enforce.
    #10     Oct 24, 2012