The SEC late Monday released for public comment its plan to do a one-year pilot program to widen minimum tick sizes for small-cap stocks.
A final decision on implementing the pilot program will be made by the Securities and Exchange Commission after the 45-day comment period ends.
The program is now listed in the Federal Register.
The program, filed by FINRA and national securities exchanges like the New York Stock Exchange and Nasdaq, will divide stocks of firms with market capitalizations of $5 billion or less into a control group and three test groups. The control group will use the current tick size of 1 cent per share, while the test groups will all quote small-cap shares initially at 5-cent minimum increments.
In one test group, trading would continue to occur at any price increment that is permitted today; in the second, trading would be done in 5-cent increments; and in the third group, securities would be subject to a “trade-at” requirement, which prevents price matching by a trading center that is not displaying the best bid or offer.
The SEC in June ordered the exchanges and the Financial Industry Regulatory Authority to develop and file a proposal for a tick size program. The commission wants to determine whether such changes would enhance market quality for smaller capitalization stocks.
