Commentary

Jared Dillian
Traders Magazine Online News

Was it Worth It?

In this piece from 10th Man, author Jared Dillian discusses how the ETF revolution is less about ETFs and more about indexing; about how people have come to view stocks less as stocks and more as blobs of stocks.

Traders Poll

Would you feel better if the Chicago Stock Exchange were purchased by U.S. firm or consortium rather than a foreign one?




Free Site Registration

November 1, 2001

Reserve Size Requirement Reduced

By Gregory Bresiger

Beginning this month, Nasdaq has ended the requirement that market makers display at least 1,000 shares for their quotes using the market's reserve size feature. Under a rule change, market participants will now only be required to display 100 shares when using the feature.

The change was designed, in part, to make the competition between market makers and ECNs fairer. ECNs are only required to display 100 shares. Many traders have been pushing for the change.

One trader describes the 1,000 share size requirement as "ridiculous" especially since ECNs are only required to display 100 shares. But the flip side of the change, according to critics, is the reduction of transparency.

With 1,000 shares traders could tell if a participant was a serious player, said another trader. The problem is a rule change designed to help one constituency - individual investors - often comes at the expense of another, market makers. The issue is transparency versus the need of market makers not to tip their hands when they are trying to execute a trade.

The reserve requirement is used so market makers can line up a large block of shares for trading without letting competitors or day traders know what they're about to do.