Nasdaq spreads are narrowing for bigger issues
NEW YORK -- Under the glare of a Justice Department antitrust investigation, Nasdaq Stock Market traders have been quietly tightening up their pricing -- at least for big, high-profile Nasdaq stocks.</br></br>Price "spreads" on many such stocks have narrowed, or certainly are more negotiable, since the Justice Department's inquiry into alleged price fixing was disclosed last month, say traders at several Wall Street securities firms that are part of the Nasdaq system. Spreads -- the difference between the "ask" price at which dealers will sell a stock and the "bid" price at which they will buy stock -- indicate how much brokers stand to profit from trading a given stock.</br></br>According to the traders, Microsoft Corp.'s trading spread currently is consistently 1/8 of a point, or 12.5 cents, whereas it used to trade often at 1/4 point, or 25 cents. Intel Corp. has also been tightened up to trade consistently with a 12.5-cent spread, as have Oracle Corp. and Cisco Systems Inc. Microsoft, Intel and Oracle are Nasdaq's biggest stocks, and Cisco is the sixth-biggest. Any spread above 12.5 cents tends to raise eyebrows given that on the New York Stock Exchange, big issues typically trade at 1/8-point spreads.</br></br>But spreads haven't changed much -- actually, they've widened in individual cases -- on some of the least-active stocks among Nasdaq's 5,700 issues, traders say. Spreads are typically wider on smaller stocks, even those listed on markets other than Nasdaq, because they tend to be riskier for dealers to hold in inventory and more difficult to trade than big stocks.</br></br>Nasdaq's pricing practices have become a hot topic since an academic study in May suggested that Nasdaq dealers "implicitly collude" to maintain wide spreads of 25 cents or more on the 100 most-active Nasdaq stocks.