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Intel Spread Is Cut by Half

October 25, 1994|SCOT J. PALTROW

NEW YORK — Nasdaq market makers Monday abruptly gave up half their profit margin on trading Intel Corp. stock, the over-the-counter market's second-largest company.

The spread on the stock--the gap between the bid price at which market makers were willing to buy the stock, and the higher asked price at which they were willing to sell--narrowed to 12.5 cents and remained there all day. For years, traders said, the stock's narrowest spread had been 25 cents, except for periods of a few minutes in recent months when two small, maverick market makers cut it.

The closing quotation for the Santa Clara, Calif.-based computer chip maker's stock was $59.375 bid, $59.50 asked. Most New York Stock Exchange-listed companies, including many much smaller than Intel, have spreads of 12.5 cents.

Last week, the Justice Department confirmed that it had begun an antitrust investigation into possible collusion among Nasdaq market makers to keep spreads wide. A six-part Times series on Nasdaq trading has also raised questions about the spreads.

Nasdaq and the big market makers have denied there is any collusion to set prices.

National Assn. of Securities Dealers spokesman James D. Spellman said Morgan Stanley & Co., a Wall Street investment bank and a major Nasdaq market maker, began cutting the spread on Intel on Friday. Morgan Stanley and nearly all of the stock's 62 other market makers in the past had quoted the stock only in increments of 25 cents, which meant the spread couldn't be less than that. But Friday the firm began quoting bid and asked prices in eighths, such as $60.125 or $59.875.

At the beginning of trading Monday, most other market makers joined in, for the first time quoting the stock in odd eighths. Spellman said the NASD "had no idea" what led to the narrowing. Morgan Stanley spokeswoman Tracey Gordon said she wasn't immediately able to provide comment from the firm late Monday.

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