> To win trades you either must undercut your competitor by trading for less edge, or beat him to realizing the opportunity by either predicting better or getting faster, usually some combination of all those.
On the other hand, at least in theory, the rest of the market benefits from smaller spread (a lot), and faster execution time (a bit).
I trade in stocks that aren't constrained by the tick size. Latency still matters a lot.
I agree the rule isn't sensible though. Much of the fragmentation in the US is driven by exchanges with inverted rebate structures (maker pays, taker gets paid to hit/take) + midpoint trading that are effectively a back-door way to quote sub-penny in stocks where the true competitive spread should be less than 1c.
On the other hand, at least in theory, the rest of the market benefits from smaller spread (a lot), and faster execution time (a bit).
It's a shame about the sup-penny rule. (https://www.chrisstucchio.com/blog/2012/hft_whats_broken.htm...) Without it, we'd get more of the former and less of the latter.