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From: Bruce
Please stop the Tick Size pilot trial for Nasdaq NMS as it increases liquidity risk, hinders risk management, and destroys important Market information. The Market must be the litmus test. Also, how Market participants are actually able to participate must be considered. When the software can not update in realtime anything that increases volatility can be a nightmare. In the single digit Nasdaq segment, Volume with a tight Bid/Ask spread is the definition of adequate liquidity. My stock setup turns red when the spread is 5 cents or greater as an indication of illiquidity and change. A 1 cent spread is a prudent prerequisite for using Market and Stop orders given that it will allow orders to fill closer to the Price. 2 ticks away with a 1 cent spread is 2 cents vs 10 cents with a 5 cent spread, 2 ticks away on both sides creates a 20 cent spread thus the risk is self evident. Getting filled 5 cents away with a 1 cent spread could be detrimental for you. After Order entry, protecting capital must be facilitated not hindered. Placing stops above breakeven can occur at any Price level, just as major technical analysis levels do. A Volume spike to the High of the Day followed by a widening B/A spread is an important indication of a top in Price, often after a run-up. Hence, the reason things turn red for me. In a list of such stocks, the one's with the least Volume and Trades per minute mostly have spreads of 5 cents or greater. The nature of the Market must prevail and not be distorted. After all, it is just a random Auction Market to begin with. Supply and demand must displayed as it exists. Profound logic and belief systems is what makes the Market but can never be allowed to obscure that which otherwise would be available by the Ticker Tape undistorted. Price moving in your direction with strong Volume and a tight Bid/Ask spread is the foundation for success and participation. Going back to fractions of 1/20 vs the old 1/16 pricing reverses the benefits of the penny pricing model. To successfully participate in this Market segment with your money at risk requires you to pick a 1 cent spread over a 5 cent spread both before and after the tick size pilot. The threshold to participate in a Stock with a 5 cent or wider spread is and must be much higher. If a Stock is going up, a limit order will not get filled only a Market order with a tight spread will get filled near as possible to what is hoped for. Participate in the Market in real time and the clarity of what is important will become self evident. In a volatile Price segment the clarity of penny Pricing outweighs any argument that would distort it's importance. Of course the nonsense of 4 decimal Pricing should be eliminated as it hinders order execution and liquidity. While the last trade price should be displayed as it occurred, 100 ticks per 1 penny really causes problems for the software. Orders can only be entered with 2 decimals to begin with. At the least, 4 decimal pricing should only be allowed to occur if it exists in reality. Having 4 decimal pricing when the last 2 digits are 0 would be like having 6 decimal pricing when the last 4 digits are 0, both make no sense and are problematic. The penny pricing model works because it represents how dollars are denominated, anything displayed as more or less is reason enough to look elsewhere. The need for clarity in a random volatile Market speaks for itself in all matters. Thank you for your consideration, Bruce
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