WASHINGTON, D.C.—Today, the U.S. Securities and Exchange Commission (SEC) adopted rule amendments to lower the minimum pricing increments at which a stock’s price can be quoted.  Director of Securities Policy Benjamin Schiffrin released the following statement:

“The SEC’s adoption of lower minimum pricing increments, or ‘tick sizes,’ for many National Market System stocks will benefit investors. The current $0.01 minimum tick size for NMS stocks prevents traders from quoting the prices that reflect true supply and demand. Lowering the minimum tick size will allow investors to better determine the prices at which they would bid or offer without being impeded by a fixed minimum tick size that is too large and that prevents stocks from reaching a natural price that would be within a penny spread.

“The tick size rule adopted today should also reduce off-exchange trading by inducing order flow onto exchanges. Although the SEC should have harmonized trading increments and pricing increments as it proposed, a reduction in tick sizes still makes it easier for traders to enter and exit positions. This should lead to an increase in trading on the exchanges.

“The SEC also made the right call in lowering the minimum tick size to $0.005, as we urged in our comment letter, rather than a minimum tick size of $0.001 or $0.0002 for certain stocks as it proposed. Lowering the minimum tick size to $0.001 would have raised the risk that at each price point there would be less liquidity and less stability in the quotes, undermining the objective of increasing participation on the exchanges. The complexity of the proposal also would have advantaged high-frequency traders, who have a long history of leveraging complexity to their advantage and to the detriment of ordinary investors.

“Similarly beneficial for investors will be the SEC’s determination to lower the fees to access protected quotations to $0.001. This reduction in access fees will impose lower costs on investors. The change from a minimum tick size of $0.01 and an access fee cap of $0.003 to a minimum tick size of $0.005 and an access fee cap of $0.001 also means that the access fee cap will be lower as a percentage of the minimum tick size than it is currently.

“The SEC’s rule, which the Commission adopted unanimously, is an important step to modernize market structure and make the market fairer and more competitive for investors.

See our comment letters here and here for more information.

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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.