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The vast majority of Americans are basically antiprivilege and antielitism. While we believe in equality of opportunity for everyone, it is the availability of the opportunity that counts. The same thinking applies to the financial markets, where everyone desiring equal quote information and order execution should have the opportunity of unimpaired access. In fact, if we stand for anything as a country, it is the fall of undue privilege and the rise of opportunity. The business of America is business, and everyone should have an inalienable right to participate. |
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Firm Quote Rule Order Size |
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For years I have stated that market making is a voluntary act. No one is forced into making a market. The minimum number of shares that market-making dealers are obliged to honor at their quoted price is now stated in hundreds (instead of thousands). This change was a direct result of the SEC Order Handling Rules and the development of ECNs. The firm quote rule was modified to coincide with the usual customer round lot order of 100 shares because the market makers were required to accept the customer limit order as their price (or send the customer order to the ECNs). |
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In January 1997, the SEC adopted an initial phase of a pilot program to test whether the reduced 100-share (down from 1000 shares) firm quote would reduce spreads and increase liquidity. At the time, the NASD's Small Order Execution System (SOES) constituency feared that the dealer's smaller firm quote obligation would put them out of business. The SEC agreed to test the lower firm quote on the top 50 (the ''nifty 50") Nasdaq stocks. The nifty 50 was incrementally increased and is now up to 150. The NASD has filed rule proposals with the SEC to extend the "actual size" to all Nasdaq stocks. |
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Obviously, the market makers are dancing with glee. No issuer will have confidence in listing on the Nasdaq if the dealers are only willing to support the stock for 100 shares. I |
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