"We share Chairman Donaldson's concerns that the effect of the shift to trading stocks in penny increments, much less in sub-penny increments, needs closer scrutiny to ascertain if it has proven detrimental to the quality of the markets," said Phlx Chairman Meyer "Sandy" Frucher. Frucher added: "We have seen in Philadelphia, as in every other market center, how trading in pennies has severely hampered the profitability of trading firms. When trading firms can't sustain their business, liquidity evaporates, and the overall quality of the markets is diminished. The investing public will be ill-served if liquidity continues to leave the markets, or if limit orders, for example, continue to become more difficult to execute."
In addition to the effect of dampened liquidity on the markets, decimalization has also led to less market transparency, as the number of price points increased, and the increased prevalence of locked and crossed markets - all features that harm the quality of the securities market.
Frucher supports the SEC revisiting the issue of decimalization in the equities markets and asks the Securities and Exchange Commission and Congress to recognize that decimalization may be a failed experiment. It is important that the US securities markets continue to be the most liquid, transparent and active markets in the world.
The Philadelphia Stock Exchange (PHLX) was founded in 1790. The PHLX trades more than 2,200 stocks, 1,016 listed equity options, 12 sectors index options and currency pairs. For more information about the PHLX and its products, visit www.phlx.com.
