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The NYSE is taking steps to undo the damage done to market transparancy
when decimal trading began. The issue is that the fractions in previous
use incorporated price ranges that were a lot wider than the price range
of decimals (1 penny). So the number of shares available at "1/4" were
almost always greater than the number of shares at, say, ".02" This
means that while decimalization has narrowed spreads, transaction costs
are sometimes higher, since multiple transactions may be required to
fill an order at one penny, then the next penny, etc., whereas a single
transaction may have been enough at 1/4.
It also means that quotes at a given decimal price tend to obscure the
true market transparancy since the best bid/offer at a given decimal may
represent only a few shares, while the bulk of shares available may be
several cents away, thus giving a distorted picture of depth.
The initiatives proposed by the NYSE have fast-track approval from the
SEC, and are already being tested by many quote vendors. 87% of the
issues comprising the S&P 500 Index are NYSE listed stocks.
More here: http://www.nyse.com/press/NT00022742.html
Thanks to John Lothian for further disseminating this news.
Regards,
Monte
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