* Trading of lots of under 100 shares has become more common
* High-priced stocks, high-frequency trading boost odd lots
* Stock exchanges, regulators, voted Oct. 24 to add to data
By John McCrank
NEW YORK, Nov 20 U.S. equities exchanges and
regulators have agreed to begin reporting stock orders of less
than 100 shares, common in high-priced popular names like Apple
Inc and Google Inc, on a feed of real-time
stock data, in an effort to boost market transparency.
Members of the exchanges and the Financial Industry
Regulatory Authority voted on Oct. 24 to include the orders -
known as odd lots - in the data, said Colin Clark, a senior vice
president at NYSE Euronext. The U.S. Securities and
Exchange Commission was also represented at the meeting, he
While investors can place orders for any number of shares,
odd lots are not currently displayed on the consolidated feed of
stock transactions, adding opacity to the market, said Maureen
O'Hara, a Cornell University professor who co-authored a paper
on the subject.
"Post-trade transparency, that is, the ability to know what
has happened in the market, is something that is important and
hiding the odd lots has ended up dramatically decreasing
post-trade transparency," she said. "This is really just a
question of catching up with the modern evolution of the
Twenty years ago, odd lots accounted for less than 1 percent
of trades, and came almost exclusively from the retail sector -
think grandpa giving 10 shares of McDonald's as a
Christmas gift. But today they make up as much as a fifth of
trades, O'Hara said, and are used most often by high-frequency
The surge has also been driven in part by higher-cost tech
names like Apple, Google and Amazon.com Inc. At
hundreds of dollars a share, 100 share orders are out of reach
for many people.
Last year, around 53 percent of Google trades, 38 percent of
Apple trades, and 26 percent of Amazon trades, were odd lots and
were not included in the consolidated data feed, said O'Hara.
Around 4.14 billion shares of Apple, not including odd lots,
changed hands last year, according to Thomson Reuters data.
Apple currently trades for around $557 a share.
In the realm of high-speed electronic trading, where success
is measured in micro-seconds, orders are often sliced and diced
into smaller parcels so they can be sent to numerous trading
locations for faster execution. So if an order of 500 shares
were sliced up and all of the orders were executed, that 500
share order would not have been reported.
It is also common for high-frequency traders to use odd lots
to probe for hidden liquidity, pinging different venues with
single orders looking for buyers.
There is no date set for exchanges to begin reporting odd
lots, but it will likely start sometime around the middle of
2013, Clark said.
While the odd lots will be added to the trade feed, they
will not be last sale eligible, which means the smaller trades
will not trigger short sale restrictions or trading pauses if
they fall outside of a given price band.
Odd lot orders will not be added to the quote feed, meaning
that only orders of 100 shares of more will be used to determine
the best price available for the security, but that decision may
be revisited in the future, Clark said.