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Thursday, August 28, 2014 5:40:16 AM

SEC slips trade-at into tick pilot

After three months of hard work by US exchange operators and the Financial Industry Regulatory Authority (FINRA), the US Securities and Exchange Commission (SEC) has released the details of the 12-month pilot project that will broaden the trading increments for certain small-cap stocks.

The Commission also has opened a 21-day comment period for the proposed plan and plans to decide whether to approve the pilot project after the comment period closes.

“I look forward to the public comment on the proposal and the expeditious development of a final pilot program,” said SEC Chair Mary Jo White.

The 1,200 stocks that will be used in the test with have a market capitalization of US$5 billion or lower; an average daily trading volume of 1 million shares or lower and a closing share price of at least US$2.

The pilot will consist of a control group, which will maintain the current tick increment and trading methods and three test groups.  Exchanges will quote stocks in the first test group in a US$0.05-increment and trade at any price increment that is permitted currently. 

The exchanges will quote and trade stocks in the second group using a minimum US$0.05 increment, subject to certain exceptions. In the third test group, exchanges will allow trading using the same minimum quoting and trading increments, but will include a ‘trade-at’ obligation, which prevents price matching by trading centres not displaying the best bid or offer.

Rob Daly +1 646 308 2772 rdaly@assetinternational.com