Why do options have only 2 decimals?

breadcrum said:
the market wants that, the market makers don't want that. Very significant distinction.
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Obviously, we don't have the same definition of 'the market'.

And btw, without Market makers, there would be no option market as we know it.
 
Key here "as we know it". Absolutely agree. But we would have a market. Potentially, and most likely, a more efficient one. There is always a market when there is supply and demand.

rb7 said:
Obviously, we don't have the same definition of 'the market'.

And btw, without Market makers, there would be no option market as we know it.
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Even with more decimals if I indeed wanted to buy 100 I would adjust my limit price according to the price at or below which sellers offer the aggregate of my bid volume.

Fully agree with all your other points, made. Tighter spreads are good for the public, bad for MMs. And a single exchange and market place for all would be on the top of the wish list.


Robert Morse said:
No, because there are other factors with derivatives. Are you saying you prefer 1.0590x1.0592 1 x 1 or 1.05x1.06 100x100? That is just one result of this. The other is the ability to for a MM to step in front of you by $0.0001 and you do not get to buy on the bid or sell on the offer until the stock moves, and prices change. Referring to the comment by JSOP, I have been in the business since 1981 and was an AMEX MM from 1985 until 2010. Single listed wide spreads were awesome for MMs but not for customers. Removing fractions and adding $0.05 and $0.01 spreads was bad for MMs and great for the public. IMO, 16 option exchanges is terrible for the public. As a customer, I prefer the CME model with one order book and price discover. The best would be price/time priority. My bid at that price, I get filled before others. That would encourage tighter markets and fairness. This is all just my opinion.
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The forex trading market is overcrowded with traders, and new brokers are evolving every day. In such a saturating condition, showing options with more than two decimals shall make the bidding process more cumbersome. Further, a more precise fraction will lower the chances for a trader to bid and sell.
 
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