Tick Sizes – A Small Entity Compliance Guide
Amendments to Rule 612 of Regulation NMS for the quoting of certain NMS stocks[1]
On September 18, 2024, the Commission amended, among other things, Rule 612 of Regulation NMS[2] to establish a second minimum pricing increment (also known as tick size) of $0.005 for the quoting of certain NMS stocks.
Specifically, for quotations and orders in NMS stocks priced at or greater than $1.00 per share, the tick size will be either $0.005 or $0.01 as follows:
|
Tick Size (Minimum Pricing Increment): |
If the Time Weighted Average Quoted Spread of the NMS stock during the Evaluation Period was: |
|
$0.005 |
$0.015 or less |
|
$0.01 |
Greater than $0.015 |
The primary listing exchange for an NMS stock will be responsible to measure the Time Weighted Average Quoted Spread (TWAQS) during the Evaluation Period.
Under the rule, there will be two Evaluation Periods in one calendar year during which the TWAQS will be calculated to determine the assigned tick size. For the first Evaluation Period of a calendar year (January to March), the tick size for each NMS stock will be operative starting on the first business day of May through the last business day of October of that calendar year. For the second Evaluation Period of a calendar year (July to September), the tick size for each NMS stock will be operative starting from the first business day of November through the last business day of April of the next calendar year.
Broker-dealers and vendors, including small entities, will need to make changes to their systems and incur certain costs to comply with the change in tick sizes. For example, broker dealers will need to make changes to their computer systems and/or to deploy new technology solutions to reflect the quotations of certain NMS stocks that will be able to be quoted with the new smaller $0.005 tick size. Broker-dealers may also need to educate their customers, including retail customers, on the new tick size.
Compliance Date
The compliance date will be the first business day of November 2025, and the first Evaluation Period will be from July through September of 2025. The tick size will be operative on the first business day of November 2025 and continue to the last business day of April 2026.
Other Resources
The adopting release for the amendments can be found on the Commission’s website at https://www.sec.gov/files/rules/final/2024/34-101070.pdf.
Contacting the Commission
The Commission’s Division of Trading and Markets is available to assist small entities with questions regarding these amendments. Questions may be directed to the Division of Trading and Markets by email at tradingandmarkets@sec.gov or by telephone at (202) 551-5777.
[1] This guide was prepared by the staff of the U.S. Securities and Exchange Commission (“Commission”) as a “small entity compliance guide” under Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996, as amended. The guide summarizes and explains rules adopted by the Commission, but it not a substitute for any rule itself. Only the rule itself can provide complete and definitive information regarding its requirements.
[2] See 17 CFR 242.612.
Last Reviewed or Updated: Nov. 21, 2024