If this passes market go bye byehttps://twitter.com/talesmelodicpts/status/1361806203647520769 …
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I guess it really matters what the profit margins of HFT options MMs here are. I don't think in a lot of cases they can absorb 10bp.
They wouldn’t continue quoting the same spreads if there was a transaction tax! Spreads would widen but more volume would be transacted near the NBBO because there is more profit margin built in for market makers. Not obvious that it’s worse for liquidity.
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Where by liquidity I mean something like “ability to transact a given volume without moving the price (much)”
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I mean. I suppose but at the end of the day liquidity in the standard sense of measurement (width of bid-ask) would likely decrease substantially, especially on fairly liquid tickers, no?
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Yes but the quoted bid-ask is not the main cost you pay when executing an order — the price slippage is. Saw an article earlier today which said you can frequently trade 1% of ADV in SK at the top of book price — that never happens in US.
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This might be okay for institutions but would be a net negative for retail. We saw several regulatory initiatives to widen the spread on equities by increasing the tick size. Rightly shot down.
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