The US Securities and Exchange Commission (SEC) and the Financial Regulation Authority (FINRA) are exploring the impact that increased tick sizes have on market quality for smaller capitalisation stocks.
In a 12 month pilot programme, the SEC plans to experiment with widening minimum quoting and trading increments, known as tick sizes, for certain types of stock. These will be limited to those with a market capitalisation of $5 billion or less, a closing share price of at least $2 per share and an average daily trading volume of under one million shares. Pilot securities will be quoted in $0.05 minimum increments, compared to the current tick increment of $0.01 per share.
The Commission plans to monitor how system, which will be rolled out nationally, benefits investors and issuers. The SEC will seek comment on the proposed plan, which will be subject to Commission approval following a 21-day public comment period.
“This is an important step for a valuable initiative that could have meaningful implications for market quality,” said SEC Chair Mary Jo White. “I look forward to the public comment on the proposal and the expeditious development of a final pilot program.”
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