By James Langton
(November 22 – 17:50 ET) – The Toronto Stock Exchange is proposing a pilot project to test trading in penny increments.
Earlier this fall the TSE proposed a possible move to 1¢ increments for trading in listed securities priced at $5 or more. No comments were received by the exchange, so the TSE intends to go ahead once it gets the approval of the Ontario Securities Commission.
A similar move is underway in the United States. The New York Stock Exchange plans to expand its pilot project on December 4 to include another 94 securities, including a couple of interlisted stocks. Extendicare Inc. and TVX Gold Inc. are already trading in pennies on the NYSE.
The TSE is proposing to introduce a pilot program effective December 4. The following interlisted securities will trade in penny increments: Barrick Gold; Biovail Corp.; Fahnestock Viner Holdings Inc.; Inco Ltd.; Smithfield Canada Ltd. Exchangeable; and Veritas DGC. Inc.
The exchange says the pilot will provide it with an opportunity to gather information on the impact of the move to penny trading. In particular the TSE wants to assess the effect on:
- Registered Traders and their ability to fulfil existing market making obligations;
- the displayed size of the orders in the book at the bid and the ask;
- the volume of trading;
- the depth of the book; and
- the total number of orders in the book.
The NYSE currently plans to have all equity securities trading in decimals by January 29, 2001. If all goes according to plan the TSE will move to pennies then, too.
The TSE has notified market data vendors of its plan. None have indicated that they anticipate any problems.