4 ms·

60% seems pretty arbitrary. Any idea where this number comes from?

• waffenklang 16y ago
  maybe there were a limit order from nyse high graded manager at 59% of the last trade of one of the stocks and he likes to don't have to work again for the next couple of years. But this demonstrates well the advantages of options and other instruments that were not traded on an exchange. Even just for hedging sometimes there are more profitable than the lowest limit order.
  • borism 16y ago
    that's pretty ridiculous conspiracy theory! here's more knowledgeable answer: http://www.cnbc.com/id/37019184 http://www.cnbc.com/id/37019184 As near as I can tell from talking to market participants, there is no rule on this. This appears to be a compromise reached among the electronic markets. But why 60 percent? Why not, say, 40 percent, or 30 percent? Not clear, but one obvious answer is that there are a lot fewer trades that need to be busted when it's at 60 percent versus say, 40 percent. This saves a lot of grief.
• nandemo 16y ago
  Well, it is arbitrary. The problem is not so much that this particular threshold is arbitrary, but that the rule was made after the fact. For what is worth, in Japanese exchanges the price of any stock cannot go up or down by more than a pre-defined limit. For instance, if Sony's closing price was 100 yesterday, today the lower and upper limits would be 80 and 120. If the price goes down to 80, Sony stops trading. That's a kind of interventionism and some people don't like it, because you might have the stock and there might someone willing to buy for 79 but you can't sell it. But the limits do prevent wild volatility, and it's well known that they exist so everyone can take it into account.