SEC Proposes Rules to Amend Minimum Pricing Increments and Access Fee Caps and to Enhance the Transparency of Better Priced Orders

The Securities and Exchange Commission today proposed to amend certain rules under Regulation NMS to adopt variable minimum pricing increments, or “tick sizes,” for the quoting and trading of NMS stocks, reduce access fee caps for protected quotations, and accelerate the transparency of the best priced orders available in the market. The proposed amendments are designed to enhance trading opportunities for all investors and to help ensure that orders placed in the national market system reflect the best prices available for all investors.

“A large and growing amount of equity trading now goes into what many call the dark markets, particularly off-exchange market centers such as wholesalers and dark pools. Such off-exchange market centers, though, benefit from transacting using a different set of rules from the ones on national securities exchanges. This may undermine competition,” said SEC Chair Gary Gensler. “Thus, I am glad to support today’s proposal. Consistent with our mandate, guided by economic analysis, and shaped by public opinion, this proposal would enhance efficiency, competition, and fairness across our equity markets. That gets to the heart of our mission.”

Specifically, the Commission proposed to amend Rule 612 of Regulation NMS to establish variable minimum pricing increments for quotations and orders in NMS stocks that are priced at, or greater than, $1.00 per share based on objective and measurable criteria and make such minimum pricing increments applicable to the trading of all NMS stocks regardless of price, subject to certain specified exceptions.  Under the proposal, the primary listing exchanges would measure and calculate the Time Weighted Average Quoted Spread for the relevant NMS stock and determine the applicable minimum pricing increment.

To reflect the lower variable minimum pricing increments proposed under Rule 612, the Commission also proposed to amend Rule 610 of Regulation NMS to reduce the access fee caps for protected quotations in NMS stocks priced $1.00 or more to $0.0005 per share for those NMS stocks that have a minimum pricing increment of $0.001, and to $0.001 per share for those NMS stocks that have a minimum pricing increment greater than $0.001 per share. For protected quotations in NMS stocks priced less than $1.00 per share, the proposal would cap access fees at 0.05 percent of the quotation price. In addition, the Commission proposed to amend Rule 610 to require exchanges to make the amounts of all fees and rebates determinable at the time of execution. 

Finally, the Commission proposed to accelerate the implementation of previously-adopted round lot and odd-lot information definitions to expedite the transparency benefits of these definitions by making information about better priced interest available in the market more widely available on a faster timetable. Moreover, the Commission proposed to amend the definition of odd-lot information to require the identification of the best priced odd-lot orders available in the market. 

The proposing release is published on SEC.gov and will be published in the Federal Register. The public comment period will remain open until March 31, 2023, or until 60 days following publication of the proposing release in the Federal Register, whichever is later.