Part of Nov 2012 OTC markets newsletter-for stocks over 20 cents this will potentially increase number of orders or mm's displayed in level 2-
for stocks below 10 cents just the opposite (orders below 10k shares will no longer be required to be displayed for stocks below 10 c) which goes against their stated purpose of lowering min quote sizes in order to allow more orders to be displayed-and stocks below 10 cents often have a higher bid/ask spread percentage wise.
FINRA Reduces Minimum Quote Size Requirements
On November 12, FINRA amended Rule 6433, which reduces the minimum quote sizes that broker-dealers are required to display on our OTC Link ® ATS and decreases the number of price-based minimum sizes from nine to six. The Rule was instituted for a one-year pilot period.
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Original Tier Sizes
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New Tier Sizes
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FINRA believes that lowering minimum quote sizes will allow more investor orders to be displayed and decrease spreads. The risk is that lowering minimum quote sizes will result in a decrease in total displayed liquidity. Rules regarding quote sizes and price increments are controversial topics for market participants. In the JOBS Act, Congress has called for the SEC to study increasing minimum price increments in trading of smaller companies because of the perceived lack of displayed liquidity due to penny increments.
Implementing Rule 6433 as a pilot program allows the SEC to gather data before making a long-term decision as to whether the potential benefits of increased limit order display ultimately balance the risk of a potential reduction in overall liquidity. As the operator of Open, Transparent and Connected financial marketplaces, we support making market structure changes as pilot programs to facilitate the adequate data collection and analysis necessary to make informed regulatory decisions.
One thing we can be sure of is that the smaller inside quote sizes will make access to Real-time Level 2 Quotes
even more important for investors seeking to monitor the complete depth-of-book information for the 10,000 OTCQX, OTCQB and OTC Pink securities that trade on OTC Link ATS. Real-time Level 2 Quotes provide investors with increased price transparency and are freely available on www.otcmarkets.com for companies that sponsor them for their investors.
We encourage you to contact us to tell us your thoughts on and experiences from this rule change as we continue to work to ensure that the OTCQX, OTCQB and OTC Pink marketplaces offer efficient trading at the best possible price, empowering a broad range of companies to improve the quality and availability of information for their investors.
For full details of this announcement, please see: FINRA Regulatory Notice 12-37
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To learn more about Real-Time Level 2 Quotes, click here
. For a full list of companies that sponsor Real-Time Level 2 quotes for their investors, click here .
