Fractional change creates a new market at trading firm. (Wall Street West).

WHEN the securities industry switched from pricing stocks in fractions to decimals last year, it cut spreads made by market makers -- the brokerage firms that act as middle men in stock trades between buy and sell orders. The idea was that retail investors should get a better price on trade executions. The spreads acted as built-in, hidden commissions, some argued.

While decimals helped cut spreads, they exacerbated another problem for large institutional investors -- the variance in prices quoted by various market makers and alternative trading venues. The decimal switch cut the margin of error to a mere penny or less for Nasdaq market makers on the inventory of shares they held. Some don't hold any inventory at all, and as a result, individual market makers are less liquid.

Such market fragmentation is providing opportunities for Burbank-based Universal Network Exchange Inc., a specialized stock brokerage that helps traders find the best deals.

Four-year-old Universal Network has grown to 100 employees by cutting out a niche on Wall Street, watching all the possible trading venues -- Nasdaq, the NYSE floor, electronic communication networks, regional exchanges, block trading desks -- and seeking the best price for its clients.

"We aggregate the liquidity," said Randy Abernethy, founder and president of UNX. "You are not stuck to just one ECN or Nasdaq market makers."

By constantly monitoring prices in all markets, UNX helps customers come as close as possible to eliminating the spread earned by market makers, Abernethy said. The growing firm has more than 200 institutional clients, with volume often crossing above 10 million shares a day, and growing, Abernethy said.

UNX allows institutional investors to outsource their trading operations and concentrate on picking stocks, instead of fussing with market gamesters. "We allow portfolio managers to concentrate on what they do best: research. We do the trading for them," Abernathy said.

Even the mighty and litigious NYSE now controls just over 80 percent of trades in Big Board-listed stocks, Abernethy said, as more traders bypass the floor to find each other through ECNs.

UNX makes no spread, and charges only simple commission for trades, said Abernethy. "It starts at pennies per share, and gets cheaper with volume," he said. The firm doesn't have a money management arm.

Contributing columnist Benjamin Mark Cole writes about the local investment community. He can be reached at [e-mail].