Tick Size Pilot Program

On May 6, 2015, the Securities & Exchange Commission (SEC) issued an order approving the National Market System (NMS) Plan to implement a Tick Size Pilot Program by the National Securities Exchanges and FINRA.  The Order approved the NMS Plan for a two-year period and will officially commence on October 3, 2016.  The Tick Size Pilot is a data-driven test to evaluate whether or not widening the tick size for securities of smaller capitalization companies would impact trading, liquidity, and market quality of those securities.  The pilot will consist of a control group and three test groups, with each test group having approximately 400 securities.

The groups are defined as follows:

  • The control group will be quoted and trade at their current tick size increment.
  • The first test group will be quoted in $0.05 increments, but will continue to trade at their current price increment.
  • The second test group will be quoted and trade in $0.05 minimum increments, but would allow certain exemptions for midpoint executions, retail investor executions, and negotiated trades.
  • The third test group will adhere to the requirements of the second test group, but will also be subject to a "trade-at" requirement. There will also be an exemption for block size orders.

Market quality statistics, market and marketable limit order data, and market maker profitability will be collected and provided to the SEC on a monthly basis.  Market quality data and aggregated market maker profitability data will also be made publicly available on a monthly basis by each Plan Participant that acts as the designated examining authority for a Trading Center or Market Maker that is required to submit data under the plan.

The participants to the plan are required to submit their initial tick pilot assessment 18 months after the plan begins based on data generated during the first 12 months of operation.