SEC pilot program for tick size on penny stocks?

[ajacobson]

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.

 

[Metamega]

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.

 

[d08]

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.

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.

 

[MoreLeverage]

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.

 

[JesseJamesFinn1]

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.

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.

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!

 

[listedguru]

The 5c tick pilot is not for penny stocks -- it's for smaller-cap stocks that are above $2.00 initially (although they'll remain on the list unless they close below $1.00 for one day). Here is a URL that contains lists of penny pilot stocks, to be updated once the pilot goes live on Oct 3:

http://www.finra.org/industry/oats/tick-size-pilot-data-collection-securities-files

I agree that the motives, not to mention the details, are confusing -- one of the FAQ's on the FINRA site is 48 pages long! I certainly don't think that this is going to increase "analyst research" for small caps (one of the supposed motivations for the pilot). I'm sure it will increase the size of the bid/offer, for what that's worth.

The aspect that most interests me is the bucket of "trade-at" securities, which I think is potentially really good, although they've left quite a few loopholes -- they really should have just had a bucket with no internalization, as that's the biggest single thing harming displayed small-cap liquidity in today's microstructure. When >50% of a security's volume is internalized to wholesalers, it has a pretty bad impact on the displayed market.

http://www.nanex.net/aqck2/3519.html

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

 

[listedguru]

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

 

[zdreg]

. I would say the vast majority of these pilot stocks already trade with a spread bigger than .05 on average

how did you come to the conclusion?

 

[zdreg]

It is a good way to get the market makers in there since it may be worth their time and funds now.

it is just an opportunity for market makers(wall street) to steal from the public

 

[listedguru]

how did you come to the conclusion?

It's highlighted in this study:

http://www.convergex.com/ticksizepilot/

-Guru