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Looking Beyond Pennies

The nitty-gritty on portfolio margining and its expected impact

Traders Magazine, April 2007

Susan Milligan

The U.S. listed options marketplace is facing two important structural changes this year. The first of these is the pilot plan that began in February to quote options in penny increments. Thirteen options classes were included in the pilot as a test for the industry. Moving from nickel and dime increments to pennies has produced a wide range of predictions, many based on decimalization in the stock markets in 2001. Dire warnings of imploding market data systems and a loss of liquidity providers are countered with sunny forecasts of pennies giving a turbo boost to the already tremendous options volume growth.

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