Executive Summary
In December 2022, the U.S. Securities and Exchange Commission published a proposal which would, among other things, amend tick sizes under Rule 612 of Regulation National Market System ("Reg NMS") to establish a variable minimum pricing increment model that would apply to both the quoting and trading of NMS stocks and reduce access fee caps under Rule 610 of Reg NMS in conjunction with the reduction in tick sizes.
The minimum pricing increments would establishe for quotations, orders, indications of interest and trade in NMS stocks priced equal to or greater than $1.00 per share:
Minimum Pricing Increment | If the Time Weighted Average Quoted Spread for the NMS stock during the Evaluation Period was: |
$0.001 | Equal to or less than $0.008 |
$0.002 | Greater than $0.008 but less than or equal to $0.016 |
$0.005 | Greater than $0.016 but less than or equal to $0.04 |
$0.01 | Greater than $0.04 |
The proposed rule would reduce the level of access fee caps in the following ways:
- For NMS stocks priced at $1.00 or more, the access fee cap would be $0.0005/share that have minimum pricing increment of $0.001.
- The access fee cap would be $0.001/share that have a minimum pricing increment greater than $0.001.
- For quotes priced less than $1.00, the acess fee cap would 0.05% of the quotation price.
The proposed rule would prohibit a national securities exchange from imposing, or permitting to be imposed, any fee, or providing, or permitting to be provided, any rebate or other remuneration for the execution of an order in an NMS stock, unless it can be determined at the time of execution. Amended Rule 160 would require national securities exchanges that impose or fee or private a rebate that is based on a certain volume threshold (or tiered requirements or tiered rates based on minimum volume thresholds) to set such volume thresholds (or tiers) using volume achieved during a stated period prior to the assessment of the fee or rebate.
The proposed rule would also accelerate the date by which market participants must comply with the odd-lot information and round lot definitions adopted under the MDI Rules. Compliance would be required 90 days from a final rule's adoption.
Please contact Adam Jacobs-Dean or Daniel Austin with any questions regarding these proposals.
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Adam Jacobs-Dean
Managing Director, Global Head of Markets, Governance and Innovation, AIMA
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Daniel Austin
Head of U.S. Markets Policy and Regulation
Timeline
AIMA has categorized this proposal as Low Priority/Low Impact and it is therefore represented in bright yellow in the AIMA Regulatory Horizon Scan gantt chart.
Estimated Compliance Date3 | August 19, 2025 | **New** |
Estimated Effective Date2 | August 19, 2024 | **New** |
Estimated Publication Date1 | June 19, 2024 | **New** |
Comment deadline for proposal | March 31, 2023 | |
AIMA response to proposal filed | March 31, 2023 | |
Proposal published by SEC | December 14, 2022 |
1 Subject to change. We have estimated a publication date based on the SEC's Fall 2023 Regulatory Flexibility Agenda which scheduled this for completion in the first half of 2024. Of course, this is only an estimate and may move forward or backward as actual matters develop depending on the priorities of the SEC. This estimate has been provided solely to allow people to visualize the potential overlaps in compliance burdens for multiple pending rules at the same time.
2 Subject to change. The effective date for the final rules has been estimated as 60 days following publication. Note that for this purpose we have assumed the SEC's publication date and the Federal Register publication date are identical for ease of calculation. This will not be the case, but the actual time between (i) the SEC approval and publication on the SEC website and (ii) the official Federal Register publication is an unknowable period ranging from a few days to several weeks depending on multiple non-transparent variables. This means that in the end the actual effective date and therefore the actual compliance date will always be later than the estimate even if the SEC approval date estimate is correct.
3 Subject to change. We have estimated that compliance will be required from 12 months after the effective date based on the compliance period noted in the proposal.
Future AIMA Work
We will be preparing a summary of the final requirements and holding a webinar to walk through what the new rules will require within 4 weeks of the SEC's publication of the final rules. Watch this space for details.