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A comment on Berkshire Hathaway’s stock price is too high for Nasdaq computers. Parent comment
The rationale and effects of the sub-penny rule are quite complicated. And there's lots of lobbying done in either direction.
The bigger the smallest price increment, the more important speed becomes.
The original justification for minimum increments has gone: it was a workaround the limitations of human traders and human market makers.
But, alas, even with computers there are still some downsides to just allowing essentially arbitrary precision prices.
(I do find it somewhat strange that the SEC makes rules about this, though. Why don't they leave that to the individual exchanges?)
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The rationale and effects of the sub-penny rule are quite complicated. And there's lots of lobbying done in either direction.
The bigger the smallest price increment, the more important speed becomes.
The original justification for minimum increments has gone: it was a workaround the limitations of human traders and human market makers.
But, alas, even with computers there are still some downsides to just allowing essentially arbitrary precision prices.
(I do find it somewhat strange that the SEC makes rules about this, though. Why don't they leave that to the individual exchanges?)