Sub-Pennies Irk Market Makers

Tunick, Britt Erica
May 2003
Investment Dealers' Digest;5/12/2003, Vol. 69 Issue 19, p11
Trade Publication
Sub-penny trading came onto the scene after the introduction of decimalization when electronic communication networks (ECNs) such as Island/Instinet, Redibook ECN LLC and Brut LLC not only provided traders with technologies able to place bids and orders in penny increments, but in sub-penny increments as well. “If someone in a venue like an ECN or something else is attempting to say their bid is better because they've improved it by one tenth of a cent and the stock is a 30 dollar stock, it just doesn't mean anything. And if they're attracting order flow based on that, it's just confusing to the marketplace, it's not transparent and adds very little value,” Andrew Brooks, vice president head of equity trading at T. Rowe Price, said. There have been complaints against penny-jumping in listed stocks in cases where specialists have profited from inside knowledge about demand for specific stocks by jumping in front of customer orders with bids only a penny higher.


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