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January 1, 1998

Odd-Sixteenths

By John A. Byrne

First came the study in May 1994 by two academics, William Christie and Paul Shultz, that purported to demonstrate the absence of odd-eighth quotes on Nasdaq was evidence of price fixing by market makers. Now comes a sequel, of sorts - a study by two other academics, Yusif Simaan of Fordham University and David Whitcomb of Rutgers University, that purports to demonstrate the absence of odd-sixteenth quotes on Nasdaq over two separate two-week periods, in September and October, as fresh evidence of more price fixing.

"The most striking finding in this paper is clearly that leading market makers still have an extreme tendency to avoid odd intervals in their advertised [Nasdaq] quotations," the paper noted. "The same firms, when they come to lay off positions on electronic communications networks (and to a lesser extent, in their advertised quotations toward the end of the day) appear more willing to quote odd sixteenths."

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