Oh I agree zdreg about regulation, it just seemed to me that the bid/ask spread would be the sort of thing, absent manipulation, would basically take care of itself. In other words, if the bid ask spread is 1 cent, you have a very liquid market. If its TOO liquid, and the market makers can't make money on the 1 cent spread, some would leave until the spread got bigger. If a stock has a 10 cent spread, and market makers are making money hand over fist, others would enter the market until the spread narrowed until no excess profit. Just seems something the market would be better setting on its own rather than some regulators trying to set what the spread should be.
Coming at it another way - think about the universe of the 3 market situations the minimum 5 cent tick (spread) could affect:
1. Bid-ask spread is already greater than 5 cents, the rule would have no effect.
2. Bid-ask spread is equal to 5 cents, the rule again would have no effect.
3. Bid-ask spread is less than 5 cents - presumably the market is already plenty liquid hence the low spread, so all you are really doing in this situation is shifting money from the wallets of the retails, etc. to the pants of the market maker - but why would you do this when they were already making money with the smaller than 5 cent spread (which we know because they are choosing to be there and make the trades instead of leaving and not making the trades), and the retails, etc. already had a plenty liquid market?
I dunno, just seems funny. Thanks.
