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Just another thought... The NYSE proposals look almost as if they are
planning to implement a NASDAQ-style price and depth reporting system,
similar to Level II. I think this type of reporting could increase
volatility because of its potential to attract day traders who normally
trade nasdaq-only stocks, using Level II screens. This volatility could
show up in the associated index futures (over 85% of S&P 500 stocks are
NYSE Listed).
Hard to say how the picture will change again when single-stock futures
begin trading...could actually serve to reduce volatility as a leading
price-discovery mechanism (not the common view)...
Regards,
Monte
"Monte C. Smith" wrote:
>
> 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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