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.