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Incentivizing a Competitive NBBO For All - Traders Magazine
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Would 605 Work Better in Dollars? - Traders Magazine
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Fidelity pushes SEC to approve its Bitcoin ETF in tête-à-tête
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Traders Magazine
By Phil Mackintosh, Senior Economist, Nasdaq
In the U.S., most stocks trade with the same trading rules the same one-cent tick, the same 100-share round lot, the same price improvement calculation versus NBBO.
But as today’s charts show, stock prices and trade sizes vary significantly across corporates, exchange-traded products (ETPs) and special purpose acquisition companies (SPACs).
These differences are important to recognize, as they have implications for applying “one-size-fits-all” rules to a not-so-uniform marketplace.
Stock prices and trade sizes vary greatly (for corporates)
Data shows the dispersion of prices is much bigger for corporates than ETFs or SPACs (Chart 1). In fact:
Traders Magazine
By Phil Mackintosh, Chief Economist, Nasdaq
There has been a lot of discussion about the odd lot problem in U.S. markets, especially as odd lots have been increasing. The latest range of solutions focuses on making the problem smaller.
But what if we just made the odd lot problem go away?
What if we eliminated round lots altogether?
From NBBO to nBBO
We wouldn’t be the first country to do this. Most developed markets already trade in integer shares, as do many emerging markets.
The biggest fear is that moving from a round lot (NBBO) allows smaller odd lots to set the best price (let’s call it the nBBO), which would also reset benchmark prices used to measure retail price improvement and institutional execution quality.