Further, market makers provide liquidity for smaller, less-traded companies by purchasing them from a seller even if there is no buyer. In these cases, since the market maker is taking a larger risk by holding a stock, the spread is generally wider. But with decimalization we will be able to trade securities in increments of one penny. Many analysts believe that the decimalization will further drop the spread downward to as little as one penny. This is good news for brokerages and consumers, but there are several risks involved in changing the system.
Many experts predict a surge in trading as the cost of trading drops.
This could cause a capacity problem for the stock markets, which are currently upgrading their systems to handle the expected rush. The expected drop in unit profits for market makers should at least partially be made up in an expected increase of volume. These smaller volume stocks present a much higher risk, and as such they are normally traded with a much higher spread to compensate for their lack of constant liquidity. The difference between the two is kept by the market maker. After decimalization, the spread would be allowed to close down as low as a penny for a company such as this.