Wednesday, August 08, 2012 4:52:40 PM
FINRA Rule 6460, Display of Customer Limit Orders, Effective May 9th, 2011
The new rule, effective yesterday, is great for penny stocks. Before this rule market makers would only show 5,000 shares on the bid and ask while traders would have no idea how many shares were available to either buy or sell. It may sound a bit drastic, but a few years from now traders will wonder how they managed to trade without seeing the true share information, much like people today wonder how they ever got around years ago without their cell phones.
The benefits of this rule weren't any clearer than today with FBCD, when market maker ETMM showed 880,000 shares on the bid at $.051. A trader would feel much more comfortable buying a stock when he/she knows that there is over $40,000 worth of demand at a specific price. Its really pretty simple. A strong bid will garner strong buying, a weak bid will likely trigger selling. Those 5,000 block buys to bolster the bid won't last anymore as traders can now see right through them. There is now a true depth to the level II.
This type of transparency is great for penny stocks. It really works both ways as a thin offer could lead to buyers, while a light bid could lead to selling. Either way it allows the market to find the price for a stock without having to wonder how many shares are available for sale or purchase.
The new rule, effective yesterday, is great for penny stocks. Before this rule market makers would only show 5,000 shares on the bid and ask while traders would have no idea how many shares were available to either buy or sell. It may sound a bit drastic, but a few years from now traders will wonder how they managed to trade without seeing the true share information, much like people today wonder how they ever got around years ago without their cell phones.
The benefits of this rule weren't any clearer than today with FBCD, when market maker ETMM showed 880,000 shares on the bid at $.051. A trader would feel much more comfortable buying a stock when he/she knows that there is over $40,000 worth of demand at a specific price. Its really pretty simple. A strong bid will garner strong buying, a weak bid will likely trigger selling. Those 5,000 block buys to bolster the bid won't last anymore as traders can now see right through them. There is now a true depth to the level II.
This type of transparency is great for penny stocks. It really works both ways as a thin offer could lead to buyers, while a light bid could lead to selling. Either way it allows the market to find the price for a stock without having to wonder how many shares are available for sale or purchase.
Join the InvestorsHub Community
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
