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There's nothing strange about it and you're referencing things that aren't exactly relevant to the issue. The SEC has rules about lit market quotes which exist

by Kranar 5y ago

There's nothing strange about it and you're referencing things that aren't exactly relevant to the issue. The SEC has rules about lit market quotes which exist to give integrity to the price-time priority. No exchange is allowed to publicly quote fractional pennies so as to give someone a way of "jumping" the queue so to speak, but there are plenty of ways to transact at fractional pennies so long as one isn't quoting it on the lit market. For example one can submit a mid-point peg order which can be filled at a fractional penny: https://www.nasdaqtrader.com/content/productsservices/trading/midpointpeg.pdf https://www.nasdaqtrader.com/content/productsservices/tradin... There are also auctions that take place on a daily basis, such as the opening auction and closing auction, where trades may execute at a fractional price. Furthermore NASDAQ also operates as a reporting facility, and as such reports trades made through ADFs such as FINRA, dark pools, off-exchange block trades, and inside quotes which are quite often executed as fractional pennies. https://www.nasdaqtrader.com/content/home/help/tsiqtxtkey.pdf https://www.nasdaqtrader.com/content/home/help/tsiqtxtkey.pd... Anyways, all this to say that the situation is a lot more detailed that you make it seem from your two references. It's not just a simple matter of SEC says orders have to be to the penny, so NASDAQ must be doing something really bizarre here.

eru 5y ago
> No exchange is allowed to publicly quote fractional pennies so as to give someone a way of "jumping" the queue so to speak, [...] The rationale and effects of the sub-penny rule are quite complicated. And there's lots of lobbying done in either direction. The bigger the smallest price increment, the more important speed becomes. The original justification for minimum increments has gone: it was a workaround the limitations of human traders and human market makers. But, alas, even with computers there are still some downsides to just allowing essentially arbitrary precision prices. (I do find it somewhat strange that the SEC makes rules about this, though. Why don't they leave that to the individual exchanges?)

by Kranar 5y ago

eru 5y ago

> No exchange is allowed to publicly quote fractional pennies so as to give someone a way of "jumping" the queue so to speak, [...] The rationale and effects of the sub-penny rule are quite complicated. And there's lots of lobbying done in either direction. The bigger the smallest price increment, the more important speed becomes. The original justification for minimum increments has gone: it was a workaround the limitations of human traders and human market makers. But, alas, even with computers there are still some downsides to just allowing essentially arbitrary precision prices. (I do find it somewhat strange that the SEC makes rules about this, though. Why don't they leave that to the individual exchanges?)