Penny problems could get even worse when Nasdaq converts to decimal trading in April. Nasdaq insists it's ready. The markets have no one to blame but themselves. As far back as 1997, when Congress started pressing for a switch to decimal pricing in stocks, academics and the SEC predicted in detail the pitfalls of penny trading. So the exchanges are stuck.
Decimal trading has advantages.
But researchers have long known that increasing the number of prices at which dealers can trade will also multiply the number of quotes. That puts more strain on the quote system. The junior market should ease into penny trading over three months, rather than crashing into it over four weeks. True, any delay would raise a howl on Capitol Hill. But Congress will be just as mad if Nasdaq's trading breaks down.