Exchanges to Delay Including ‘Odd Lots’ in Volume Tally
A plan to start including U.S. stock trades of fewer than 100 shares, known as odd lots, in the official tally of American volume was delayed by seven weeks.
The change, which was supposed to take effect on Oct. 21, will now start on Dec. 9, pending regulatory approval, according to notices on the websites of New York-based Nasdaq OMX Group Inc. and NYSE Euronext.
U.S. Securities and Exchange Commission Chairman Mary Jo White set a mid-November deadline for market owners to devise suggestions for preventing outages like Nasdaq’s three-hour halt on Aug. 22. That shutdown was caused by an error in Nasdaq’s securities information processor, or SIP, the same system exchanges are updating to accommodate odd lots. The Oct. 21 date for the odd lot transition was announced two weeks before the Nasdaq malfunction.
“It seems prudent to wait,” Christopher Nagy, who founded consultant Kor Trading LLC after leaving TD Ameritrade Holding Corp. in 2012, said in a phone interview today. The delay is “probably due to the SIP error and a reluctance to do anything different until they’re sure,” he said. “I don’t think they want another meltdown like we saw in August.”
Rising share prices and the spread of computer strategies have reduced the size of stock trades, making more transactions ineligible for inclusion in the public record. The average transaction for Standard & Poor’s 500 Index companies has shrunk to fewer than 200 shares from about 800 shares a decade ago, according to data compiled by Credit Suisse Group AG.
Cornell University’s Maureen O’Hara and Chen Yao and Mao Ye of the University of Illinois published a paper in 2011 that estimated excluding transactions of fewer than 100 shares meant 4 percent of volume wasn’t recorded. The authors said in June that the figure had since risen to 4.9 percent.
Trading of exchange-listed U.S. stocks totaled 5 billion shares today, according to data compiled by Bloomberg that don’t include odd lots.
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