SEC Announces Pilot Plan to Assess Stock Market Tick Size Impact for Smaller Companies
The SEC proposed a non-punitive 12-month pilot program with national exchanges and FINRA to test wider tick sizes ($0.05) for small-cap stocks to assess market quality impacts, with no fraud, charges, or penalties involved.
The SEC, at its direction, partnered with national securities exchanges and FINRA to propose a 12-month pilot program testing tick size changes on 1,200 small-capitalization stocks (market cap ≤ $5B, avg. daily volume ≤ 1M shares, price ≥ $2). The program includes a control group with $0.01 ticks and three test groups with $0.05 quoting and/or trading increments, one of which adds a 'trade-at' requirement to prevent price matching outside the best bid/offer. No fraud or enforcement actions are involved; the initiative is purely experimental, requiring 21 days of public comment before approval and a post-pilot assessment to evaluate market quality outcomes.
The SEC, acting on its June order, proposed a 12-month pilot program with national securities exchanges and FINRA to study the effects of widening minimum tick sizes on small-cap stocks with market capitalizations of $5 billion or less, average daily trading volumes of one million shares or less, and closing prices of at least $2 per share. The pilot will include a control group of 400 securities maintaining the standard $0.01 tick size, and three test groups of 400 securities each, with varying combinations of $0.05 quoting and trading increments, including one group subject to a 'trade-at' requirement that prevents price matching outside the best bid or offer. The securities in each group will be selected via stratified sampling to ensure balanced representation. Comprehensive data on trading activity, liquidity, and market quality will be collected and made publicly available for independent analysis. The SEC will solicit 21 days of public comment before deciding whether to approve the plan, and after the pilot concludes, exchanges and FINRA will submit a formal assessment of its impact. This initiative is purely regulatory and experimental, with no allegations of fraud, misconduct, or financial penalties—its sole purpose is to evaluate whether larger tick sizes improve market structure and investor outcomes for smaller companies.
Exhibits & Attached Documents (2)
Extracted insights
- $5.00B $5 billion ≥$1B
- person commission approval
- company control group
- agency Financial Industry Regulatory Authority
- agency Finra
- person mary jo white
- person national market system plan
- person national securities exchanges
- person pilot program
- person price increment
- person price matching
- company securities
- person test groups
- person tick size increment
- person tick sizes
- unknown trading
- Securities and Exchange Commission announced proposal
- national securities exchanges filed proposal
- Financial Industry Regulatory Authority filed proposal
- proposal establish national market system plan
- national market system plan implement pilot program
- pilot program widen tick sizes
- Commission use pilot program
- pilot program assess changes
- Mary Jo White said step
- Commission ordered exchanges
- Commission ordered FINRA
- exchanges develop proposal
- FINRA develop proposal
- SEC seek comment
- plan subject Commission approval
- pilot program include stocks
- pilot consist control group
- pilot consist test groups
- securities selected sampling
- securities quoted tick size increment
- securities trade increments
- control group represent baseline
- securities quoted increments
- Trading occur price increment
- securities quoted increments
- securities traded increments
- securities subject requirement
- requirement prevents price matching
- pilot directs exchanges
- pilot directs FINRA
- exchanges collect data
- FINRA collect data
- exchanges transmit data
- FINRA transmit data
- exchanges make data
- FINRA make data
- exchanges complete assessment
- FINRA complete assessment
- exchanges submit assessment
- FINRA submit assessment
The Securities and Exchange Commission today announced that the national securities exchanges and the Financial Industry Regulatory Authority (FINRA) filed a proposal to establish a national market system plan to implement a targeted 12-month pilot program that will widen minimum quoting and trading increments (tick sizes) for certain stocks with smaller capitalization. The Commission plans to use the pilot program to assess whether such changes would enhance market quality for smaller capitalization stocks for the benefit of investors and issuers. “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.” In June, the Commission ordered the exchanges and FINRA to develop and file a proposal for a tick size pilot program. The SEC will seek comment on the proposed plan, which will be subject to Commission approval following a 21-day public comment period. The pilot program will include stocks with a market capitalization of $5 billion or less; an average daily trading volume of one million shares or less; and a closing share price of at least $2 per share. The pilot will consist of one control group and three test groups with 400 securities in each test group selected by stratified sampling. Pilot securities in the control group will be quoted at the current tick size increment of $0.01 per share, and trade at the increments currently permitted. The control group would represent a baseline for analysis during the pilot period. Pilot securities in the first test group will be quoted in $0.05 minimum increments. Trading would continue to occur at any price increment that is permitted today. Pilot securities in the second test group will be quoted in $0.05 minimum increments, and traded in $0.05 minimum increments subject to certain exceptions. Pilot securities in the third test group will be subject to the same minimum quoting and trading increments (and the same exceptions) as the second test group, but in addition would be subject to a “trade-at” requirement. In general, a “trade-at” requirement prevents price matching by a trading center that is not displaying the best bid or offer. The pilot also directs the exchanges and FINRA to collect and transmit data to the Commission and make the data available to the public in an agreed-upon format. After the end of the pilot period, the exchanges and FINRA will complete an assessment of the impact of the pilot and submit the assessment to the Commission.
The Securities and Exchange Commission today announced that the national securities exchanges and the Financial Industry Regulatory Authority (FINRA) filed a proposal to establish a national market system plan to implement a targeted 12-month pilot program that will widen minimum quoting and trading increments (tick sizes) for certain stocks with smaller capitalization. The Commission plans to use the pilot program to assess whether such changes would enhance market quality for smaller capitalization stocks for the benefit of investors and issuers. “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.” In June, the Commission ordered the exchanges and FINRA to develop and file a proposal for a tick size pilot program. The SEC will seek comment on the proposed plan, which will be subject to Commission approval following a 21-day public comment period. The pilot program will include stocks with a market capitalization of $5 billion or less; an average daily trading volume of one million shares or less; and a closing share price of at least $2 per share. The pilot will consist of one control group and three test groups with 400 securities in each test group selected by stratified sampling. Pilot securities in the control group will be quoted at the current tick size increment of $0.01 per share, and trade at the increments currently permitted. The control group would represent a baseline for analysis during the pilot period. Pilot securities in the first test group will be quoted in $0.05 minimum increments. Trading would continue to occur at any price increment that is permitted today. Pilot securities in the second test group will be quoted in $0.05 minimum increments, and traded in $0.05 minimum increments subject to certain exceptions. Pilot securities in the third test group will be subject to the same minimum quoting and trading increments (and the same exceptions) as the second test group, but in addition would be subject to a “trade-at” requirement. In general, a “trade-at” requirement prevents price matching by a trading center that is not displaying the best bid or offer. The pilot also directs the exchanges and FINRA to collect and transmit data to the Commission and make the data available to the public in an agreed-upon format. After the end of the pilot period, the exchanges and FINRA will complete an assessment of the impact of the pilot and submit the assessment to the Commission.