The U.S. Securities and Exchange Commission (SEC) is adopting a series of market structure reforms — including sub-penny ticks — designed to reduce trading costs and to boost market quality.
Among other things, the SEC is reducing the minimum tick size from 1¢ to 0.5¢ for stocks that are trading for at least $1/share.
Given the smaller minimum trading increment, along with concerns about market structure issues — including potential trading fee distortions and conflicts of interest — the regulator also reduced the access fee limits (from 0.3¢ to 0.1¢), and introduced requirements for exchanges to make trading fees, rebates and remuneration clear at trade execution.
Additionally, the SEC said it will accelerate the implementation of reforms related to odd lot orders, which were approved in 2020, but haven’t been enacted.
These measures are intended to enhance the availability of information about the best prices for smaller orders, it said.
“The reforms we adopted today will help promote greater transparency, competition, fairness, and efficiency in our US$55 trillion equity markets. That goes to the heart of the SEC’s mission. The reforms are pro-investors. They are pro-capital formation,” said SEC chair Gary Gensler in a release — noting that these measures represent the most significant market structure reforms since 2005.
The rule changes take effect 60 days after their publication in the Federal Register.