·
“Make-or-take pricing has significantly distorted trading,” wrote James Angel of Georgetown University in Washington, Lawrence Harris of the University of Southern California in Los Angeles and Chester Spatt of Carnegie Mellon University in Pittsburgh. “Brokers make most order-routing decisions based on the quoted prices that their clients will receive, and not the true net prices of the trades.” This quote comes from a Business Week article on a recently produced report titled “Equity Trading in the 21st Century” http://www.businessweek.com/news/2010-02-24/brokerage-prices-don-t-reflect-actual-trading-costs-study-says.html We must admit that when we first saw the report which was commissioned by Knight Capital we didn’t expect to read any
(more…)
·
A recent Businees Week article by Nina Mehta states that the SEC will probably consider allowing more stocks to trade in price increments of less than 1 cent. http://www.businessweek.com/news/2010-02-23/sec-may-allow-subpenny-pricing-for-more-stocks-shillman-says.html Question: Why does a long term investor need sub penny quotes? Answer: They don’t. The only market participants seeking sub penny quotes are the high frequency trading firms and the exchanges. We know that the biggest revenue providers to the exchanges are the HFT’s. When the HFT’s want a rule change , the process usually takes a similar approach: 1- They demand that the exchamges provide them what they want or they
(more…)
