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Small Cap Nickel Spreads
Stock traders may want to beware of small cap nickel spreads. This is a proposed change in trading penny stocks. Penny stocks have traded in one cent increments for a dozen years ever since the markets went to a decimal system instead of fractions for trading stocks. The proposal being floated comes from the major markets and from Citi Group and suggests that stocks with market capitalizations of less than three quarters of a million be traded in five or even ten cent increments. The argument is that a change to small cap nickel spreads would add liquidity to that section of the market as it would attract market makers in search of higher profits. Such a change could also be the death knell for those who currently make their money scalping in day trading on penny stocks. Basically a move to small cap nickel spreads would increase commissions and attract market makers who would in turn entice the average trader into this market sector. Perhaps we can rework the old Roman quote to say, let the trader beware.
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