Thoughts on SEC/Finra Tick Test Pilot

L

listedguru

Just wondering if anyone has any thoughts on the upcoming sec/finra tick test pilot that will expand the minimum increments that certain stocks can trade in from .01 to .05. This pilot begins getting phased in October 3rd and will run for 2 years.

There is going to be a control group that will continue to trade the same as today and (3) different test groups.

Here are the stocks involved:

NYSE:

ftp://ftp.nyxdata.com/Tick_Pilot/Tick_Pilot_Historical/NYSE_Group_Tick_Pilot_Assignments.txt

Nasdaq:

ftp://ftp.nasdaqtrader.com/files/ticksizepilot/Other/Tick%20Size%20Pilot%20Securities%20List%20with%20Group%20Assignments.txt

Some more info on the pilot:

https://fif.com/fif-working-groups/tick-size-working-group/tick-size-overview

Brokers smell trouble: http://marketsmedia.com/brokers-smell-trouble-attempt-spur-smallcap-volume/

I guess we'll know soon enough, lol.

-Guru
 
I'm all for it. From day one, I thought the move to penny increments was totally overkill, so I'm glad to see them widening things up a bit on some test stocks.
 
FYI, the complete list of all securities for all exchanges can be found here:

http://www.finra.org/industry/oats/tick-size-pilot-data-collection-securities-files

In my opinion, the 5c ticks will be helpful for increasing quote size at the NBBO and reducing quote flicker. However, internalization and fragmentation bear far more responsibility for reducing transparent liquidity in the US equity space than does the tick size. If the 5c spreads increase internalization significantly beyond where it is now, it will be a net-negative for most participants (aside from the 4 or so wholesaler firms who basically enjoy an oligopoly at this point).

http://www.nanex.net/aqck2/3519.html

I'm very happy that one of the test buckets has a "trade-at" provision to mitigate this, although it doesn't seem to go far enough as it gives a partial exemption for certain orders.
 
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