UPDATE 1-Odd-lot trades add 3 pct volume to consolidated tape
By Herbert Lash
NEW YORK Dec 10 (Reuters) - Transactions in trades of less than 100 shares boosted reported volume by 3 percent on the first day that "odd lots" were included in the public dissemination of stock quotes and sale prices, trading data showed on Tuesday.
Almost one out of every six trades, or 17.5 percent, that were reported on Monday to the "consolidated tape" were odd lots, according to the Consolidated Tape Association, a group that includes all the U.S. stock exchanges, among others.
More than half the trading in high-priced stocks, such as Google Inc, was transacted in odd lots, as a common lot of 100 shares in the company costs more than $100,000.
One out of every four trades on Nasdaq were odd lots, and made up 5.5 percent of the exchange's volume, the highest figures for all the U.S. exchanges, according to the CTA data.
Some stocks traded almost entirely in odd lots. Of stocks that traded more than 100,000 shares, 27 had half or more of their trades done in odd lots.
More than 83 percent of trades in White Mountain Insurance Group Ltd were odd lots, making it the stock with the highest percentage of transactions with fewer than 100 shares.
But only 290 trades were executed in White Mountain, compared with 21,028 trades in Google, 67.5 percent of which were transacted in odd lots, the CTA data showed.
Shares in White Mountain, a mid-cap stock, closed at $598.15 on Monday, according to Thomson Reuters, with volume at 109,991 shares. Google volume totaled 1.48 million shares on Monday, the CTA said.
Before Monday, when odd lots began to print to the consolidated tape, this data was only available on proprietary data feeds the New York Stock Exchange and Nasdaq sell.
The "consolidated tape" is a service all brokerages must buy to show customers they have obtained the best prices available.
Questions about odd-lot trades were raised almost four years ago by U.S. security regulators, especially regarding their impact on price discovery, a key attribute of the market where buying and selling determines a security's price.
Research by Professor Maureen O'Hara of Cornell University and two others had shown that odd lots contributed, in some stocks, to 30 percent of price discovery. Yet that information was not being reported to the consolidated tape until Monday.
O'Hara said in an e-mail she was pleased for getting recognition for the study "What's Not There: Odd-Lot Bias in TAQ Data," which was also co-authored by Chen Yao and Mao Ye, both with the University of Illinois at the time.
The odd-lot study raised questions about the fairness of excluding trade information, which O'Hara said was content-rich, to the 2.5 million subscribers of the consolidated tape.
"Most academic research gets dismissed, so it is fun to have a paper that actually changed a market," said O'Hara, a leading academic in the study of how electronic markets work through so-called signal processing.
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