On October 3, 2016, a National Market System (NMS) Plan to
implement a Tick Size Pilot Program commenced. The program was
introduced by an Order of the Securities and Exchange
Commission (SEC) on May 6, 2015, as "an objective, data-driven
test that is designed to evaluate how a wider tick size would
impact trading, liquidity, and market quality of securities of
smaller capitalization companies." Since 2001, stocks have
been quoted and traded at penny increments. AG Deal Diary has
previously covered the program, including the rationale behind its
The program, which will last until October 3, 2018, will cover
specified exchange-listed securities of companies that have (i) $3
billion or less in market capitalization, (ii) an average daily
trading volume of one million shares or less, and (iii) a
volume-weighted average price of at least $2 for every trading day.
The stocks will be divided into a control group of approximately
1,400 securities, which will continue to trade at $0.01 increments,
and three test groups, each with approximately 400 securities:
The first test group will quote at
$0.05 increments, but will continue to trade at $0.01
The second test group will quote and
trade at $0.05 increments, subject to certain exemptions, including
midpoint executions, retail investor executions and negotiated
The third test group will quote and
trade at $0.05 increments, but will be subject to a
"trade-at" requirement that generally forbids price
matching by a trading center that was not already quoting at that
price, subject to certain exceptions, such as for block size
The control and test group assignments were published by the
listing exchanges in September. The Financial Industry Regulatory
Authority (FINRA) consolidated the test group assignments into a
single file, which will be updated regularly and can be accessed here. Note that this file is for informational
The national securities exchanges and FINRA will be required to
submit their initial assessments of the program by April 2, 2018,
based on data generated during the first 12 months.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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