What was the logic behind forbidding fraction of a penny bidding/offering?

hedron

hedron

Is there any real logic to the fact that I as a retail trader cannot bid/offer at a fraction of a penny? It seems that the big institutions can. So, what was the logic behind this rule?

I am under the impression that this rule is good for at least Nasdaq stocks. I am not certain about NYSE or AMEX.
 
Most of it is sub-penny "price improvement" on the part of payment-for-order-flow "wholesalers" (who are in fact the largest of the HFT's, such as Knight/GETCO). They pay a fraction of a cent a share to gain exclusive access to retail orders, at the expense of everyone else, including the retail trader who got that $.01 "price improvement" for a 100 share order, but may have had a bad fill or an orders of magnitude better "price improvement" if their order had gone to an actual stock exchange instead.

http://www.nanex.net/aqck2/3519.html
 
stock777 said:
We used to be able to sub penny long ago.
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The good ole days of island and brut sub penny shavings :(

If I recall correctly part of the reason why they banned subpennies, was that it was "confusing" since the prices were small enough to overlap with the maker taker fees...
 
stock777 said:
they banned it because it let retail play the same bullshit game the insiders play.
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That's what I was thinking, but I just wanted to know what the lame excuse they used was. Sort of the way they explained why they enacted the PDT rule to "protect" us from losing money in the stock market.
 
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